Expert view: Abhishek Mishra, Founding Partner of SKG Investment and Advisory, believes the Nifty 50 will settle in the 26,500-27,000 zone by the end of the year 2025. He advises investors to remain vigilant for the potential macroeconomic risk reset that may unfold globally in the coming year. In an interview with Mint, Mishra shared his views on market trends, key risks, and themes that are likely to dominate the market in 2026. Here are edited excerpts of the interview:
What’s your December-end target for Nifty 50? What are the key triggers that will drive the market?
My sense is that the Nifty 50 will likely settle in the 26,500-27,000 zone, largely driven by a supportive macro backdrop and improving domestic flows.
The biggest driver right now is the clear softening in inflation. India’s retail inflation hit a decade low in October 2025, reaching 0.25% and the increasing probability of a 25 bps rate cut by the RBI, either in December or early next year.
Crude stabilising near $60–65 after a 20% correction has taken a lot of pressure off sentiment, especially for an import-dependent economy like ours.
Nifty 50 companies reported a 25.83% QoQ growth in profits, reflecting a strong rebound in corporate earnings momentum. On the fundamental side, earnings upgrades in banks, capital goods, defence, and select industrial names are providing the market with a strong base.
Another underrated trigger is the liquidity coming through from QIPs, IPOs and steady SIP flows, which continue to provide a healthy counterbalance to FPI outflows.
Overall, while global cues remain a swing factor, domestic resilience is likely to keep the index well-supported into year-end.
Going into the new year, what are the key risks that investors should not overlook?
While the setup for 2026 appears constructive, I think investors should remain vigilant about the potential macroeconomic risk reset that may unfold globally.
The biggest risk is still the possibility of a slower global economy, with the US and Europe showing signs of moderation in consumption and industrial activity.
This is further reinforced by the latest OECD outlook, which projects global GDP growth to slow from 3.2% in 2025 to 2.9% in 2026, highlighting that the global environment may remain softer than expected.
Any delay or reversal in the Fed’s rate cut roadmap can immediately tighten financial conditions and weaken risk appetite, especially for emerging economies like India.
On the domestic front, valuations in several pockets, particularly mid-caps, small-caps and some manufacturing names, are no longer cheap, making them vulnerable to even mild earnings disappointments.
We also can’t ignore the geopolitical layer; flare-ups that impact crude or trade routes can quickly alter the narrative.
The risk of FPI outflows also remains real, and we have already seen signs of this, with foreign investors withdrawing a net ₹ 3,765 crore from Indian equities in November, reversing the brief respite seen in October (a net inflow of ₹14,610 crore in October).
And finally, the risk of FPI outflows remains real, especially if the dollar starts strengthening again. So, while the structural story remains intact, the near-term journey may have pockets of volatility that investors should prepare for rather than underestimate.
What are the key themes that may dominate the market in 2026?
If we examine the evolving data, government policy direction, and corporate capital expenditure trends, 2026 appears to be a year where a few themes may clearly stand out.
The first is manufacturing 2.0; defence, electronics, railways, and industrial automation are all entering multi-year capital expenditure cycles.
This is further supported by the industrial momentum visible in India’s latest numbers, with the Index of Industrial Production (IIP) registering a strong 4.0% YoY growth in September 2025, led by 4.8% growth in manufacturing, indicating that the underlying production cycle is strengthening.
Second, the broader infrastructure and capital goods ecosystem will continue benefiting from strong order books, PLI incentives and the push to accelerate project execution.
Another major theme is the AI and digital adoption wave, which won’t be limited to tech firms; BFSI, healthcare, retail, and even manufacturing are seeing sharp digitalisation and analytics-led scaling.
The digital ecosystem itself is becoming a structural growth pillar, with projections suggesting that the digital economy’s share of GVA will rise to 20% by 2029-30, supported by rapid AI and cloud adoption and India hosting 55% of the world’s GCCs.
The green economy is also becoming mainstream, so renewable energy, EV supply chains and battery storage will attract disproportionate investor attention.
And finally, healthcare, especially diagnostics, CDMO and branded generics, looks set for a consolidation-led rerating.
All these themes align with structural tailwinds, including government spending, rising exports, global supply chain shifts, the China+1 Narrative, and sustained domestic consumption.
We expect these to shape the investment narrative through most of 2026.
When do you expect sentiment to improve in the mid and small-cap space?
Mid- and small-cap stocks had a phenomenal run, but the recent cooling off was almost inevitable, given stretched valuations and heightened regulatory scrutiny around excessive froth in the segment.
Sentiment, in my view, should start improving once we move deeper into Q4 FY26, provided earnings stabilise, and liquidity conditions become more supportive.
The biggest unlock will come from clarity around the rate cut cycle, both in India and globally. Lower rates usually encourage risk appetite, and midcaps/smallcaps tend to benefit disproportionately from this shift.
Another important catalyst will be the Union Budget; any measures that support manufacturing, infrastructure expansion and credit availability for smaller businesses can uplift sentiment in a measurable way.
When flows stabilise and valuations cool to more reasonable levels, fundamentally strong midcaps, especially those with robust balance sheets and strong cash flows, will be the first to rerate.
The broader recovery, however, will be selective; the market has clearly moved away from indiscriminate buying.
My expectation is that sentiment improves meaningfully after the budget and becomes structurally positive as global macro visibility strengthens through mid-2026.
What sectors may lead the next leg of the rally?
Examining earnings momentum, order book strength, and relative valuations, the next leg of the market rally is likely to be led by a combination of large, stable sectors and high-visibility growth pockets.
Banks and financial institutions are well-positioned, benefiting from stable net interest margins, strong credit demand (which is likely to intensify if a rate cut occurs), and improving asset quality.
Capital goods and engineering companies continue to enjoy multi-year visibility due to large capital expenditure (capex) pipelines across defence, railways, power, and manufacturing.
We are also optimistic about the broader pharma and CDMO space for generics, particularly where the global realignment of supply chains and product diversification will drive growth once the US tariff situation settles down.
Autos and auto ancillaries are expected to see a healthy replacement cycle, supported by improving rural demand and government push through policy stability.
Renewables and power utilities, driven by capacity additions, are also becoming core holdings for institutional investors.
However, as the government plans to allow private investment in the Nuclear sector, this is expected to be the next wave in the energy sector.
These sectors combine earnings visibility, policy support and reasonable valuations – creating a strong setup for leadership in the next rally.
What should be our equity investment strategy at this juncture?
At the current stage of the cycle, Investors shall maintain a barbell strategy that balances stability with selective growth.
On the one hand, a meaningful allocation to large caps, especially banks, FMCG, energy, and industrials (especially capital goods), helps anchor portfolios and manage volatility at a time when valuations in several parts of the market remain elevated.
On the other side, selectively adding high-quality midcaps with strong cash flows, disciplined leverage profiles and clear earnings visibility can add meaningful alpha without taking on unnecessary risk.
This is not a market where broad midcap exposure works; it’s a stock picker’s environment. Maintaining SIP discipline is crucial too, as domestic flows continue to be one of the most reliable and structural supports for Indian equities.
Investors should avoid overexposure to high valuation pockets where pricing already assumes two to three years of perfect execution.
Instead, the focus should be on companies with pricing power, predictable demand and stable margins.
This balanced approach helps capture upside without being overly exposed to sentiment-driven corrections.
Focus is shifting to the Budget now. What measures may boost market sentiment?
As the market shifts its focus towards the Union Budget, we believe a few targeted measures can significantly uplift sentiment.
The most important is continued support for manufacturing and exports through PLI enhancements, logistics upgrades and incentives for sectors like electronics, defence and chemicals.
The chemical sector, especially, has been struggling for a long time now; margins are steeply down. Incentives and duty relief will revive the sector and help it compete with China on a global level.
Another strong trigger would be policy initiatives aimed at the affordable housing sector, including higher deduction limits or renewed focus on affordable housing, which creates multiplier effects across the economy.
GST rationalisation for consumer durables and select consumption categories would also be well received, especially in a period when discretionary demand has been uneven.
Investors are also hoping for simplification in capital gains taxation, which could bring renewed retail participation in markets. Support for green energy, storage solutions and renewable manufacturing will reinforce the long-term transition story.
A growth-oriented, yet fiscally disciplined Budget is exactly what the market needs to regain risk appetite and drive the next leg of momentum.
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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.
