As India’s equity markets enter 2026, they are near record highs, but the real story lies beneath the surface, according to Trideep Bhattacharya, President & CIO–Equities at Edelweiss Mutual Fund. Bhattacharya believes that India is entering the early stages of an earnings-upgrade cycle, which could lend durability to market uptrends beyond index-level performance. He cites a resilient, domestically driven earnings base, continued balance sheet improvement, and reasonable valuations as key factors supporting the market.
Bhattacharya expects India to outperform globally, driven by its strong domestic economy and improving external fundamentals. He notes that precious metals, such as gold and silver, will continue to play a strategic role in managing portfolio volatility, but their outperformance versus equities is expected to narrow in 2026 as growth visibility improves.
In terms of sector leadership, Bhattacharya expects consumer discretionary and financials to remain in focus, driven by earnings resilience and a gradual recovery in credit growth. However, he advises caution on sectors that have run up sharply in 2025, such as capital goods, and emphasizes the importance of valuation discipline and selectivity.
Bhattacharya also highlights the importance of flexibility in portfolio construction, citing the need to adapt to changing market conditions and styles. He notes that sustained earnings upgrades ultimately drive valuations and market leadership, and that being style-agnostic is crucial in navigating different market phases.
Looking ahead to 2026, Bhattacharya identifies key triggers for equity markets, including progress on the Indo-US trade agreement, clarity around the 8th Pay Commission, and the resulting consumption boost. He also emphasizes the importance of domestic liquidity flows and earnings upgrades in shaping market direction and sector leadership.
In terms of asset allocation, Bhattacharya advises investors in the 30-40 age group to consider a higher equity exposure, complemented by debt for stability and a modest allocation to gold or alternatives for diversification and risk management. Ultimately, he stresses the importance of individual risk tolerance, income stability, and long-term goals in determining the ideal asset allocation.