Moneycontrol Pro Weekender | Looking Ahead: Key Themes For 2026

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Dear Reader,

It’s customary to look ahead at the beginning of a new year, but most predictions are best taken with spadefuls of salt. Instead, it’s more useful to look at some of the dominant market themes at the turn of the year. Nevertheless, here are the predictions for the new year by FT writers, free to read for Moneycontrol Pro subscribers.

But first, we need to acknowledge the extraordinary resilience markets and economies have demonstrated in the face of relentless headwinds. From the Ukraine conflict through years of consecutive earnings downgrades, from inflation concerns to trade wars and geopolitical tensions, economies have weathered perfect storms with aplomb. The MSCI All-Country World Index ended 2025 up 20.6 percent, shutting up all the doomsayers.

The worst may now be behind us. Policy easing in the United States and fiscal support across Europe, Japan, and China, should help lift the global economy. If markets and economies could chug along through the worst, shouldn’t things get better now?

The AI Revolution: Boom or Bubble?

Perhaps no theme dominates conversations more than artificial intelligence. Is it a bubble, or a productivity miracle? Unlike the dot-com era, AI-related stocks trade at more modest multiples while generating real earnings, and hyperscalers are battling capacity constraints rather than soft demand. This FT story has the unequivocal headline: ‘The AI boom is not a bubble’.

Much depends on whether earnings growth justifies valuations. This week, we had a comprehensive story on ‘The shape of AI to come in 2026’ while this piece identified 3 key trends that will be visible in India’s AI ecosystem in 2026. We also wrote about the implications for the Indian IT sector.

Trade: From Disruption to New Equilibrium

In the immediate future, there may be a couple of softer quarters in the US as tariffs feed through into higher prices, squeezing real incomes. But trade uncertainty should ease into the November 2026 US mid-term elections while several economies continue negotiating tariffs lower. More importantly, free-trade negotiations are mushrooming, as seen in India. This suggests the global trading system is adapting, with countries finding alternative pathways around bilateral tensions.

Monetary and Fiscal Stimulus

Central banks globally are easing. The Fed's rate cuts should weaken the dollar, helping emerging markets.

Against this easing backdrop, policy support in Europe, Japan, and China, creates a synchronized global stimulus environment. For emerging markets, this opens room for central banks to continue lowering rates, supporting domestic demand and equity markets. For India, though, we said that bond investing in 2026 will be like batting on a sticky wicket while this piece looked at India’s post-rate-cut landscape.

The Earnings Inflection

While headline global equity earnings have shown robust growth since early 2024, this has been driven largely by Technology — particularly AI-exposed hyperscalers. Beneath the surface, global markets have just emerged from a multi-year earnings downgrade cycle.

This inflection point matters. A more balanced picture is now emerging of equity markets transitioning from downgrades to upgrades across broader sectors.

Commodities: A Tale of Two Markets

OPEC+ is rapidly ramping up output in a policy shift, creating large surpluses despite modest demand growth. That will mean low oil prices.

Gold shines brightest. Central banks continue building reserves. However, lower geopolitical risk and stable inflation may limit the pace of gains. We wrote that gold and silver appear poised for continued gains, platinum may consolidate, and palladium faces uncertainty.

Also, improved global activity and a build-out of energy infrastructure potentially means robust demand for many industrial metals.

Resource Nationalism

Resource nationalism defines much of the geopolitical landscape, with rare earths and critical minerals representing an Achilles heel for the global economy. This is reinforcing large-scale capital deployment into defence, energy, and infrastructure across economies, a trend markets are already pricing in. This article shows how increased defence spending is leading to an arms race in East Asia.

The Power and Infrastructure Imperative

Data demand — driven primarily by AI — will catalyse massive growth in global power demand. The infrastructure requirements extend beyond energy to defence and transportation.

Fiscal Indiscipline: The Elephant in the Room

Government debt levels have reached heights not seen since World War II, yet appetite for fiscal consolidation remains limited. While this creates long-term sustainability questions, in the near term, it provides continued fiscal support for economic activity. We wrote about how low nominal GDP growth in India complicates the fiscal maths and on the Centre’s tax revenue squeeze. No wonder, the Centre has gone in for a steep hike in excise duty on cigarettes. We analysed the implications for Indian bonds in 2026 here.

Emerging Markets

A softening dollar, declining oil prices, easing inflation, and dovish Fed stance created positive conditions in 2025 that should continue into 2026.

India: Reform and Resilience

India stands out despite recent equity underperformance amid geopolitical tensions. Monetary easing is being reinforced by ongoing reform momentum, including labour reforms and ease-of-doing-business improvements.

Consensus growth estimates are being revised higher, marking an end to earnings downgrades. We wrote about which sectors are likely to outperform and what are the risks to watch out for.

P/E multiples remain elevated, but premiums to world and emerging market averages are below 10-year norms. Room for potential improvement in US-India relations adds to optimistic sentiment. We pointed out that the domestic-focused Indian economy/equities present a hedge to global portfolio for FIIs and that foreign investors’ disenchantment in recent years could be nearing an end. Do read our piece on ‘Will the Nifty cross 30,000 in 2026?’

What's Already Priced In?

Much of the above, though, is already priced in. Bank of America’s December Global Fund Manager Survey reveals the most bullish positioning in three and a half years. Investors have pushed allocation to stocks and commodities to the highest since February 2022. Cash levels have hit a record low of 3.3 percent.

A combined 94 percent of respondents now expect either a soft or no landing for the global economy while liquidity conditions are rated among the best of the past 17 years.

This bullish positioning represents the biggest headwind for risk assets. The key question for 2026 in the global markets then becomes whether fundamentals can validate this optimism.

The new year is, by its nature, a time for hope. Powerful tailwinds of policy support, technological transformation, and a turning earnings cycle provide encouragement. Yet, in a world where extreme bullishness itself becomes a headwind, investors must stay vigilant to the risks -- China’s doubling down on its export-led growth model being a good example.

The journey ahead may not be smooth, but at least the path ahead is clearer.

Cheers to a happy and prosperous New Year,

Manas Chakravarty

Here are some of the other stories and insights we published this week, apart from our technical picks in the equity, commodity, and forex markets:

Stocks

Is ITC a good buy, post correction triggered by the tax shock? Why this affordable housing play deserves attention, Weekly Tactical Pick: Does this chemical stock warrant attention, post recent correction? Muthoot-Microfin, Aadhar Housing Finance, Conforge’s Encora deal: A big, bold acquisition, but is it an astute bet? Titan Company: What does its lab-grown diamonds foray imply? 2025: Year of IPOs, but massive fund-raising spree yields only selective winners

Financial Times

Delivery start-ups finally get the K-shaped economy they need

Year in a word: ‘Peace’

Markets

Are natural gas prices headed for a super-cycle?

Will the IPO boom continue in 2026?

Who does the market reward? Five pointers for the patient investor

Companies & Sectors

Weight loss drugs to give fillip to Indian pharma market in 2026

Power sector’s growth tempo broke in 2025, will it revive in 2026?

Tough adjustments await the green energy sector in 2026

Indian IT eyes revival in 2026 as AI projects move from proof of concept to execution

Big dreams, and bigger leverage fuel India’s small business loans

Economy & Policy        

RBI Financial Stability Report: Banks’ clean-up is real -- but the hard work isn’t over yet

IBC at the crossroads: The direction that 2026 must show

Climate action: Why India must shift from targets to outcomes

India’s future lies in expanding its export services beyond IT

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

What the latest IIP numbers tell us

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

Governance wake-up calls from 2025: Essential lessons for a stronger 2026

Pro Economic Tracker

Geopolitics & Geoeconomics

Russia, Ukraine and the dangerous geometry of a premature peace deal

Tech & Startups

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

US firms accelerate GCC expansion in India; centres rise 45%, 2026 outlook strong