Expert view on markets: Rishabh Nahar, Partner and Fund Manager at Qode Advisors, believes the Indian stock market may give a double-digit return in 2026, but only if it rotates from a valuation-driven mindset to an earnings-anchored one. Nahar said 2026 could be a year where the key indices may not feel euphoric, but portfolios may still perform well because earnings visibility improves. In an interview with Mint, Nahar shared his views on the Indian stock market outlook, potential earnings trajectory, and his expectations from the Budget 2026, among other things. Here are edited excerpts of the interview:
What are the key takeaways from the global market’s performance in 2025?
2025 will be remembered not for volatility or corrections, but for something far more important: the concentration of leadership reached levels we have rarely seen in history.
The US market didn’t just rise, it narrowed. AI has become not just a theme but a gravitational force, pulling global capital toward a handful of companies that now behave more like “economic super-sovereigns” than traditional corporations.
This wasn’t a bull market; it was a winner-take-most market. China delivered a completely contrasting message.
After years of pessimism, investors suddenly remembered that valuations matter. The market rewarded policy-backed value pockets SOEs, banks, and industrials with a ruthlessness that only emerging markets can produce.
It wasn’t optimism. It was repricing cold, mathematical, overdue. India found itself in an unusual position: the long-term story intact, but the short-term rhythm broken.
Domestic flows held the fort, but earnings didn’t accelerate early enough, and with the global risk-on cycle fixated elsewhere, India underperformed despite doing very little wrong.
If 2024 was about “India versus the world,” 2025 reminded us that the world also has compelling opportunities.
The real insight from 2025? Capital has become impatient. It flows not to the best story, but to the story with the clearest near-term payoff.
Will the Indian stock market deliver double-digit returns in 2026?
Valuations have stopped being the conversation, as they are no longer stretched, but they aren’t bargains either. What matters now is delivery.
Our view is simple: 2026 has room for a double-digit year, but only if markets rotate from a valuation-driven mindset to an earnings-anchored one.
Three things tilt the odds in favour:
(i) The demand cycle looks materially stronger for the second half of the financial year 2025-2026 (H2FY26). Early indicators—bank credit, order books, GST collections are behaving more like early-cycle, not late-cycle, signals.
(ii) Policy reforms passed quietly over the last 18 months now enter their monetisation phase. Tax simplification, liquidity shifts, and regulatory clarity begin showing up in corporate numbers with a lag.
(iii) The market’s internal leadership is becoming broader. From banks to industrials to clean energy and even parts of consumption, the baton is passing not dramatically, but steadily.
2026 could be a year where the index doesn’t feel euphoric, but portfolios do well because earnings visibility improves sharply beneath the surface.
Why are FIIs selling Indian stocks? Why did the narrative of India’s strong growth fail to attract them?
There’s been a tendency to interpret FII selling as a verdict on India’s growth story. That is both simplistic and wrong.
FIIs sold India in 2025 because:
(i) US AI looked unstoppable (and liquidity always gravitates toward certainty).
(ii) China was too cheap to ignore, other emerging markets (EMs) offered cleaner risk–reward, and India’s starting valuations left no margin for error.
But here’s the number that matters more than outflows: Foreign investors still hold nearly ₹75 lakh crore in Indian equities. They reduced exposure; they didn’t abandon conviction.
The real insight is this: FIIs were not selling India, they were selling “expensive India.”
When the relative valuation gap normalises, the same capital will come back with remarkable speed, as it has in every cycle since liberalisation.
In other words, 2025 FII behaviour was not a macro call. It was a relative trade. And relative trades always reverse.
Why could FY26 be the first “real” earnings year in a while?
The most overlooked story of 2025 is that earnings didn’t disappoint; they merely arrived late.
Here’s what shifts in FY26:
(I) Operating leverage returns for the first time since COVID. Companies spent 2022–2024 repairing balance sheets, optimising supply chains, and digesting inflation. FY26 is when this preparation finally converts into profit acceleration.
(ii) Banks enter a goldilocks zone. Credit growth remains strong, asset quality is stable, and funding costs have already peaked. Very few cycles gift banks this combination.
(iii) Industrials are no longer about “hope.” They have visibility. Order books are the healthiest they’ve been in 15 years. Infrastructure spends are becoming predictable rather than episodic.
(iv) Exporters get a tailwind from currency and policy alignment. A weaker rupee and targeted incentives position Indian exporters competitively in sectors where India never had an edge before electronics, chemicals, and design-led manufacturing.
If FY24–25 was about valuation holding the market up, FY26–27 will be about earnings holding it up. This is a healthier market regime.
Has the RBI monetary easing cycle ended, or do you see the scope for further easing?
The most misunderstood part of the rate cycle is assuming that cuts equal stimulus. In 2025, cuts were defensive, not stimulative; they were meant to counter external tightening, not spark an overheating.
(i) The RBI will protect financial stability over growth.
(ii) A weak rupee limits how aggressive they can be.
(iii) Liquidity will be the main instrument, not rates.
Think of the RBI not as “cutting or pausing,” but as curating the growth runway, widening it when global conditions allow, narrowing it when external shocks appear.
There is space for one more shallow cut, but the era of deep, directional moves is behind us.
From here, RBI policy becomes more like steering a ship through crosswinds, measured, calibrated, and always mindful of currency optics.
What is driving the rupee lower? What does the rupee’s weakness indicate about corporate earnings?
The rupee’s depreciation in 2025 wasn’t about a crisis; it was about adjustment.
(i) A capital-flow deficit created by persistent FII equity outflows.
(ii) A policy decision to allow the rupee to reflect fundamentals rather than defend arbitrary levels.
(iii) A structural import imbalance still tilted towards energy, electronics, and gold.
What most people missed is what the currency move quietly signalled:
The world is re-pricing India from a consumption-heavy economy to an investment-heavy one. In such transitions, currencies weaken before they stabilise. Earnings, however, strengthen before markets realise it.
Exporters win. Industrials win. Global IT services win. Businesses with dollar liabilities suffer. Import-dependent consumer names see margin pressure.
But at the index level, a weaker rupee in a stable macro environment is historically associated with strong forward 12–18 month returns.
The rupee didn’t fall because India is weak. It fell because India is resetting.
What are your expectations from Budget 2026? What measures can cheer the market?
Budgets stopped being fiscal events long ago. Today, they are signalling events and messages about the government’s priorities for industry, capital, and allocation.
Here’s what would genuinely cheer markets in 2026:
(i) A fiscal roadmap that trades politics for credibility. If capex is protected while the deficit narrows even modestly, the market will reward that discipline.
(ii) A manufacturing push that feels targeted, not broad. Investors don’t want slogans; they want clarity. EV supply chains, critical minerals, grid infrastructure, and precision manufacturing are four areas where India can meaningfully lead.
(iii) Stability in capital-market taxation. The worst outcome is uncertainty. The best outcome is simply no surprises.
(iv) A coherent framework for energy transition. India’s next multi-year capex cycle depends on grid expansion, storage, and decentralised renewables. A clear articulation of this would unlock institutional flows.
(v) MSME reforms that reduce friction, not add incentives.
A compliance-light environment does more for small businesses than any subsidy ever could. If Budget 2026 can align policy intent with capital formation, the market will not just cheer; it will re-rate.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
