Moneycontrol Pro Panorama | New beginnings and new questions

Is there anything that may trip up the markets in 2026?

Dear Reader,

A very Happy New Year! If you have been a regular reader of Moneycontrol Pro, we have already armed you with the forecasts of what to expect in 2026, be it geopolitics or the economy. Over the past fortnight, we have published a series of outlooks here, here, here, and here, among others that explored the odds of events happening across borders and their implications on our lives. We hope you have taken advantage of the crystal ball gazing activities.

Yours truly is not a fan of resolutions, but the learning so far has been that the best way to turn forecasts into reality is to have resolutions. But what do we need to make resolutions? We need to identify problems and then solutions to them, and to find solutions we need to ask questions. So, here is a bunch of them in this mega piece by Financial Times, free to read for Moneycontrol Pro subscribers, that not only asks questions but also predicts events in 2026. While this gives a lowdown on what will transpire globally, let us delve into what it entails in our home, India.

The economy has entered 2026 with a bunch of good news. Industrial output for November was over a two-year high at 6.7 percent and manufacturing growth was a hearty 8 percent. As is the case with most data, the details matter, and what matters more is whether India’s factories will continue to hum in the coming months. Manas Chakravarty answers these questions in his piece here. Investors must watch for durability in consumption demand and monitor capital goods. That said, the data itself will change as a new series with base year 2022-23 would be introduced in May.

In fact, there are new questions beyond the industrial output data as well. Investors won’t have to wait long for two big events that will shape their expectations for the year. In February, the government will present its Union Budget for 2026-27 which will be followed by the monetary policy of Reserve Bank of India (RBI). Fiscal and monetary policies are the horse and the cart pulling the economy forward. But what works for the cart may not work for the horse, sometimes. A real gross domestic product growth of above 7 percent with an inflation rate below 1 percent is music to monetary policy. However, this combination leads to a deceleration in nominal GDP growth and that complicates the maths for fiscal policy. Our first Budget Snapshot shows the implications. The government’s tax revenues, fiscal deficit, and spending plan rest on its assumption of nominal GDP growth in the Budget. As such, tax revenues have come under pressure due to the goods and services tax cuts in 2025 and this has pushed the Centre to tighten spending. As Manas Chakravarty explains here, GST cuts gave a one-off stimulus to consumption, but will have an impact on fiscal spending capacity at a time when investment demand is still recovering. That would mean the Goldilocks economy may face some headwinds on capex.

That brings us to yet another important question, do we need a fiscal stimulus? Perhaps not because GDP growth at 8.2 percent is strong and monetary policy is accommodative. The odds of the RBI tightening policy are low as retail inflation may rise but remain within the flexible target range of 2-4 percent in FY27. That means no need for rate hikes and past rate cuts, a massive 125 basis points, are getting transmitted to market interest rates. To be fair, most analysts expect no rate cut in the February meeting as the central bank’s six-member rate-setting team would examine the impact of the Budget proposals.

Those at Nomura, though, are expecting a 25bps cut in the April policy. But before that, the central bank has embarked on a liquidity infusion mission through its bond purchases. That should ensure that interest rates remain benign, loan instalments attractive and bond yields low enough to prod companies to borrow for capex. Monetary stimulus is in the works which means fiscal policy can focus on prudence.

Of course, for markets just the twin policies aren’t the biggest worry. Corporate earnings must reflect the goodness in economic growth and analysts predict that corporate earnings would see an upswing in 2026. You may be all dressed up, but what if there is no invitation from anyone? The interest from foreign investors is critical and 2025 was painful here. However, this piece here argues that foreign investors’ disenchantment with Indian markets may be nearing their end.

So, we ask the final pertinent question in this piece here: Is there anything that may trip up the markets in 2026? Madhuchanda Dey details why the odds for an upside are high and an exciting year awaits equity markets. 

Investing insights from our research team

Will the Nifty cross 30,000 in 2026?

Muthoot Microfin: Why this NBFC-MFI merits attention

What else are we reading?

Budget Snapshot: Nominal GDP growth deceleration complicates fiscal maths

IIP's November Surge: A false dawn or the start of a 2026 turnaround?

Will the IPO boom continue in 2026?

Will foreign investors return to India’s markets in FY2027?

Tax revenue squeeze forces Centre to slam brakes on spending

After GST 2.0, the harder task of making the tax good and simple

From e-commerce to AI to Deep Tech: The evolving Indian VC landscape

Forecasting the world in 2026 (republished from the FT)

India’s AI Copyright Challenge: Law, data, and doctrine limits

Technical Picks: Astral, KEI Industries 

Aparna Iyer Moneycontrol Pro