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Cloudy outlook for Indian equities in 2026

With lofty evaluations a key concern, Indian companies will likely need to deliver strong earnings growth to move the needle on equity prices

Summarise
    • India's economic backdrop and earnings recovery are encouraging, but the rupee's weakness is a headache for foreign investors in Indian equities.
    • India's economic backdrop and earnings recovery are encouraging, but the rupee's weakness is a headache for foreign investors in Indian equities. PHOTO: BLOOMBERG

    Joel Phua

    Published Tue, Jan 6, 2026 · 05:24 PM

    ANALYSTS turned more constructive on Indian equities in late 2025, despite the market’s underperformance relative to its Asian peers.

    Major banks such as Goldman Sachs, HSBC and Morgan Stanley have recommended an overweight stance, citing reasons such as an anticipated earnings recovery and pro-growth policies supporting India’s economy.

    While these arguments are valid, we believe there are reasons to remain cautious.

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