As markets enter H2CY2026, analysts expect banks, defence, pharma, power, hotels and auto ancillaries to remain in focus. According to reports from Business Standard, Indian equity benchmarks opened H2CY2026 on a positive note, with the Sensex and Nifty 50 climbing over half a per cent. While easing geopolitical tensions have improved investor sentiment after a volatile H1, market participants now shift their focus to sectors that could determine the trajectory of markets in the remainder of the year. Market strategy: Valuations have also become more attractive. The Nifty 50 index is currently trading at a 12-month forward P/E ratio of 18.8x, around a 10% discount to its long-period average (LPA) of 21x. Its forward P/B ratio of 2.7x is about 5% below the historical average of 2.9x, as reported by Mint.
The banking sector appears well-positioned to deliver healthy earnings growth, as reported by SBI Securities. Sunny Agrawal, head of fundamental research at SBI Securities, noted that pressure on NIMs, which resulted from the RBI's cumulative 125 bps repo rate cut during CY2025, is expected to moderate going forward. The RBI's recent measures to attract foreign inflows through FCNR deposits and other initiatives that enable banks to mobilise overseas funds are expected to strengthen the sector's funding profile. Robust credit growth consistently remaining in the range of 15-18 per cent over the past few fortnights, combined with comfortable valuations, positions the banking sector well to outperform during H2CY2026. According to JM Financial's latest report, strong loan growth of ~16.4% YoY was recorded during Q1, while deposit growth stood at around 12.3% YoY, indicating healthy business momentum across the sector.
India's power demand narrative remains one of the most compelling structural themes in the market, according to Equirus Securities. Nevil Dedhia, MD and head of institutional equities at Equirus Securities, believes that the continued capital deployment into renewable energy, grid modernisation, and the government's renewed emphasis on nuclear power are creating a long-capex cycle. This translates into durable earnings visibility across generators, equipment suppliers, and transmission players alike for investors.
Consumer discretionary, with hotels, will remain in focus in H2, as reported by SBI Securities. Hotel companies delivered healthy earnings growth in Q4, and the momentum is expected to continue into the second half of CY2026. The hospitality industry benefits from seasonality, with the festive period from September through December typically being the strongest part of the year. In healthcare, pharma companies have very strong balance sheets and large cash reserves, creating room for M&A opportunities, according to HDFC Securities. Indian pharma companies continue investing heavily in R&D, which should support US growth through niche launches. The hospital segment also remains well-positioned for sustained growth, supported by ongoing capacity expansion, improving bed utilisation and higher average revenue per occupied bed (ARPOB), with growing demand for specialised treatments expected to drive earnings growth during H2.
The defence sector is expected to offer opportunities worth around ₹15 trillion, supported by rising defense capex and accelerating exports, as reported by HDFC Securities. Devarsh Vakil, head of prime research at HDFC Securities, noted that defence and aerospace companies continue to report strong results, with their multi-year revenue visibility keeping the sector attractive. Nevil Dedhia from Equirus Securities highlighted that policy incentives and global supply chain realignment are increasingly opening export channels for Indian manufacturers. The auto and auto ancillary sectors are also expected to remain strong after the GST rate cut last September boosted demand, particularly in the two-wheeler and passenger vehicle segments. According to SBI Securities, a favourable base effect should support robust double-digit volume growth through September, although momentum may moderate thereafter due to a higher base. Auto ancillary companies are also expected to benefit as several players continue to gain wallet share and strengthen their market positions.
