Daily Voice: Markets could deliver 15–20% gains in 2026, says INVasset's Anirudh Garg

Anirudh Garg is the Partner and Fund Manager at INVasset PMS

• 15–20% market return achievable if earnings momentum sustains and global stability persists in 2026
• Earnings upgrades from Q4 FY25 expected to gain traction, particularly in metals, construction, and banking
• Robust project pipeline should continue supporting revenue visibility

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"A 15–20 percent market return is achievable if earnings momentum sustains and global stability persists in 2026," said Anirudh Garg, the Partner and Fund Manager at INVasset PMS in an interview to Moneycontrol.

Investors should stay selective, focusing on quality businesses with strong balance sheets and earnings visibility, particularly in banking, metals, and infrastructure, he advised.

According to him, earnings upgrades from Q4 FY25 are expected to gain traction, particularly in metals, construction, and banking. "These sectors are benefiting directly from government-led capex and strong domestic infrastructure demand. A robust project pipeline should continue supporting revenue visibility," he said.

With the easing of trade deal concerns, do you think this could be a strong year for equity markets, with a possible return of 15–20 percent in the current calendar year?

With easing global trade tensions and improved geopolitical clarity, Indian equities are positioned well for the year. Greater policy visibility with key partners like the US and EU supports export-oriented sectors such as manufacturing. Domestically, strong consumption, rising urbanization, and a young demographic continue to anchor growth. The government’s sustained focus on infrastructure, technology, and renewable energy adds structural support to earnings visibility.

This blend of domestic resilience and policy-backed expansion creates a constructive backdrop for equities. However, valuations in select pockets remain elevated. Returns may not be uniform across the board.

A 15–20 percent return is achievable if earnings momentum sustains and global stability persists. Investors should stay selective, focusing on quality businesses with strong balance sheets and earnings visibility, particularly in banking, metals, and infrastructure. A disciplined, sector-focused strategy will be critical in navigating the broader market.

Are you seeing a positive movement in the economic, credit, and business cycles?

India’s economic cycle remains on a positive trajectory, supported by steady GDP growth, strong domestic consumption, and continued infrastructure spending. Government initiatives such as the National Infrastructure Pipeline and digitization efforts provide long-term structural momentum. Supportive RBI policy and improved liquidity have strengthened credit availability, benefiting both retail and corporate segments.

Banks and NBFCs are well-positioned amid sustained loan demand, while asset quality remains stable with controlled NPAs. Manufacturing and services sectors continue to show resilience, particularly in construction, automotive, and technology services.

That said, global uncertainties—especially in exports and IT—could pose intermittent challenges due to geopolitical tensions and slowing demand in advanced economies. Despite these external risks, the domestic credit environment is stable and systemic risks remain limited. Overall, the economic, credit, and business cycles appear aligned positively, offering a supportive backdrop for equities in the near to medium term.

Do you expect a strong pickup in earnings upgrades from Q4 onwards, especially after analysing the December quarter earnings?

Earnings upgrades from Q4 FY25 are expected to gain traction, particularly in metals, construction, and banking. These sectors are benefiting directly from government-led capex and strong domestic infrastructure demand. A robust project pipeline should continue supporting revenue visibility.

Cyclical sectors such as automobiles and cement are also witnessing improving demand. Rural recovery and infrastructure-led housing activity are likely to drive cement volumes, while passenger vehicles and two-wheelers could benefit from steady domestic consumption.

Technology and digital services should see stable growth, though upgrades may be more measured due to global competition and regulatory pressures. It is important to note that earnings momentum will remain sector-specific. While domestic-facing sectors could outperform, export-linked industries may face volatility from global headwinds and commodity fluctuations. Investors should therefore adopt a selective approach, focusing on sectors aligned with domestic recovery and policy support.

Are you now confident that FY27 earnings growth could be above 15 percent?

The outlook for FY27 earnings growth remains constructive, supported by India’s demographic advantage and expanding middle class. Rising technology adoption, digital penetration, and increasing consumption provide structural tailwinds across sectors. Continued foreign investments in manufacturing, renewable energy, and digital infrastructure further strengthen the long-term growth trajectory.

Sectors aligned with India’s structural transformation—such as clean energy, industrials, and digital services—are likely to lead earnings growth. Government focus on infrastructure, manufacturing incentives, and financial inclusion reforms also adds durability to earnings expansion.

While earnings growth above 15 percent appears achievable, it may not be broad-based. Sector-specific dynamics will play a key role. Banking and financial services could benefit from credit growth and reforms, though performance may vary across segments. Overall, the medium-term earnings outlook remains healthy, driven by structural reforms and domestic demand strength.

Do you expect the small-cap space to significantly outperform going forward?

Small-cap stocks could outperform in the near term, particularly if liquidity conditions remain supportive and economic momentum sustains. Historically, small caps tend to perform well during recovery phases when risk appetite improves.

However, the segment remains inherently volatile and more sensitive to shifts in sentiment or global uncertainty. Any resurgence in external risks could disproportionately impact smaller companies. Therefore, performance within the space is likely to be selective rather than broad-based.

Investors should focus on fundamentally strong small-cap companies with sound balance sheets, credible management, and visible earnings growth. Sectors with clear demand drivers and policy support may offer better opportunities. While the small-cap space holds potential for superior returns, disciplined stock selection and risk management will remain essential.

Do you see a positive outlook for metals and cement in the coming quarters?

The outlook for metals and cement remains positive, largely supported by strong infrastructure spending and housing demand. Cement companies are benefiting from steady rural and urban demand alongside government-backed construction projects, ensuring volume visibility.

In metals, domestic demand remains resilient, supported by infrastructure development and manufacturing growth. India’s integration into global supply chains and the global shift toward sustainable manufacturing are likely to sustain demand for metals such as copper, steel, and aluminum.

That said, the sector may witness periodic volatility due to global commodity price movements and geopolitical developments. Despite this, the domestic demand narrative remains strong. Overall, both metals and cement are well-positioned to benefit from continued capex and structural growth drivers in the coming quarters.

Is the IT sector likely to remain range-bound and may not drive Nifty’s upward move?

The Indian IT sector is likely to witness moderate growth in FY26, with earnings stabilizing after a period of strong expansion. While long-term digital transformation trends remain intact, near-term headwinds include global demand moderation, regulatory scrutiny, and competitive pressures.

Additionally, the rapid advancement of AI may disrupt traditional service-based models, particularly for companies heavily reliant on outsourcing. Compared to global peers, Indian IT firms have historically invested less in product innovation and R&D, which may limit near-term upside.

Given these dynamics, the sector may remain range-bound and may not be the primary driver of Nifty’s gains. Broader participation from banking, metals, and infrastructure could play a larger role in index performance. IT will remain structurally relevant, but its leadership may depend on innovation and adaptation to evolving technology trends.