India likely to outperform global markets in 2026; asset allocation key: ICICI Pru MF's S Naren

S Naren, ICICI Prudential AMC ED and CIO

Indian equity markets, which remained largely subdued in 2025 despite strong macroeconomic fundamentals, are expected to outperform global peers in new year, says S Naren, Executive Director and Chief Investment Officer of ICICI Prudential Mutual Fund.

Naren stated, the year 2025 turned out to be a “year of hibernation” for Indian markets despite broader economic indicators remaining strong. India posted low fiscal and current account deficits, low inflation and strong economic growth. He said, “despite that, Indian rupee underperformed against all currencies of the world including the dollar”.

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In his annual outlook for 2026, Naren sees a turnaround, he said, “We think 2026 should be different and India should outperform most markets in 2026”. Naren believes strongly in India growth story, he says, “We continue to like India's story considering India is one of the best growth prospects in the next one decade and has a very good demographic profile for long-term investors”.

He advises asset allocation key for portfolio with a little higher portion towards equities. Naren says, “We think at this point of time the best way to invest would be in the form of asset allocation, and one can take a little bit of higher risk towards equity compared to where you were taking risk in 2025 January simply because in the last one-year Indian markets have underperformed most markets in the world”.

He also advises, moderation in exposure to precious metals. As precious metals have emerged the best-performing asset class over the past one year, five years, and may be even over longer periods, raising concerns of stretched valuations.

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Naren also warns of risk. He sees risks to remain elevated globally. Several international markets appear overvalued, particularly US technology stocks, while precious metals are showing signs of excessive optimism. He said, “Most markets in the world look overvalued, particularly the US NASDAQ, and precious metals are showing signs of euphoria”. In this backdrop he calls for a cautious and balanced investment approach. Silver price has more than doubled in last one year, similary gold prices also increased by more than 70 percent, compared to key equity indices which delivered around 10 percent return.