According to The Economic Times, FY26 was a challenging year for Indian markets, primarily due to global geopolitical tensions, rising crude oil prices, and foreign investor outflows. As reported by ETMarkets, while the first half saw strong momentum, the later part of the year witnessed correction and volatility. Somil Mehta, Head of Retail Research at Mirae Asset ShareKhan, highlighted that markets appear to be entering a phase of consolidation rather than structural weakness. Mid and small caps saw sharper declines due to high valuations, but domestic fundamentals remained strong with steady economic growth and strong participation from domestic investors.
As reported by ETMarkets, a meaningful market revival in FY27 will hinge on global stability—particularly easing geopolitical risks, stable crude prices, and a return of foreign inflows. Key triggers include stability in crude oil prices, which will be very important for India, along with a return of FII inflows, stable currency movement, and continued earnings growth from Indian companies. Domestic factors such as government capex, RBI policy stance, and strong consumption demand will also play a key role. A combination of global stability and strong domestic growth can bring back bullish sentiment, according to Mehta's analysis. The latest Economic Survey 2025-26 confirms that real GDP growth for FY27 is projected at 6.8% to 7.2%, with India's potential growth increased to around 7% due to sustained reforms.
According to ETMarkets, investors should focus on sectors with strong earnings visibility and policy support. Banking and financials remain attractive due to steady credit growth and improving asset quality. Defence and capital goods will benefit from government spending and long-term order books, while pharma offers stability in uncertain global conditions. Infrastructure-related sectors also look positive due to ongoing capex push. After recent correction, some sectors are becoming attractive, with IT stocks available at better valuations compared to previous years, though concerns around AI and global demand remain. The Economic Survey 2025-26 highlights that industrial growth is estimated at 6.2% in FY26, with manufacturing showing strong expansion at 8.4% in H1 FY26, driven by demand and capacity utilisation.
As reported by ETMarkets, gold and silver should be seen as a hedge rather than core investment, with ongoing global uncertainty likely to support gold prices. Silver may remain more volatile but can benefit from both industrial demand and safe-haven buying. Investors can maintain a small allocation of around 10-15% in gold and silver to balance risk, especially during uncertain global conditions. This approach helps protect portfolios during volatility and currency weakness.
According to ETMarkets, India continues to trade at a premium compared to other emerging markets, justified due to strong economic growth, stable policy environment, and better corporate earnings visibility. However, in the near term, valuations had become stretched, especially in mid and small caps, leading to the recent correction. After this correction, valuations in large caps are becoming more reasonable, making India relatively attractive from a long-term perspective. FII flows have remained weak due to global uncertainty, rising US interest rates, and currency pressures, with a reversal depending on global stability and better risk sentiment. The Economic Survey 2025-26 notes that FDI flows declined by 11% in 2024 (YoY) excluding conduit economies, reflecting weakened investor confidence amid global uncertainty.
