With the September quarter (Q2FY26) earnings season ending on a healthy note, the possibility of an India–US trade deal on the horizon, favourable growth–inflation dynamics, and valuation comfort in large-caps, the Indian stock market benchmarks — the Sensex and the Nifty 50 — appear poised to hit record highs in the coming days.
The Sensex and the Nifty 50 hit their 52-week highs of 85,801.70 and 26,246.65, respectively, on November 20. Now, the 30-share pack is eyeing to top its all-time high of 85,978.25, which it scaled on September 27 last year. The Nifty 50, too, is close to its record high of 26,277.35, which it hit on the same day.
Indian stock market: Ripe to hit a record high soon?
There are several tailwinds that can drive the Indian stock market to uncharted territories in the short to medium term.
After nearly six quarters of soft earnings, experts see a rebound from the second half of the financial year (H2FY26), which could extend to the next financial year (FY27).
The rebound in earnings could be due to supportive fiscal measures and monetary policy, better liquidity, an improving India-US relationship, healthy domestic demand, and a lower base for earnings.
“As market participants await to see further evidence of percolation of GST2.0 benefits into most consumer goods demand, we believe that the balance-of-risk-reward is skewed to the upside and Indian markets should begin to now retrace the underperformance over several
of its emerging market (EM) peers (MSCI EM is up 26% in the past year compared to India’s 12%),” brokerage firm Motilal Oswal Financial Services noted.
The brokerage firm maintains its positive view on domestic stocks due to an improving earnings momentum, reasonable valuations, a sustained “whatever-it-takes” approach of policymakers, solid macro indicators aided by prospects of a thaw in geopolitical relations, and likely bottoming of FII selling.
As market sentiment improves, investors face a classic question: should they tweak their mutual fund investment strategies?
Mutual fund investment: What market titans say?
Investing is a long-term game. While occasional tweaks to the strategy may be required, it is always advisable to align one’s investment approach with their risk appetite and financial goals.
Having said that, it is a fact that India’s macro meter is in solid shape, and investors must try to benefit from it.
S Naren, ED and CIO of ICICI Prudential AMC, pointed out that the Indian macroeconomic situation is extremely strong with GDP at 7.8%, fiscal and current account deficit at manageable levels and inflation at record lows.
The only concern is that valuations are not cheap, even though there has been some moderation from the peak. In valuation terms, large caps appear to be better placed than mid and small caps.
Naren said for those looking at making staggered investments through a systematic investment plan (SIP), the allocation can be directed towards large-cap, flexi-cap, and hybrid strategies.
Hybrid and multi-asset funds can serve as effective vehicles to navigate volatility, offering downside protection without completely foregoing equity exposure, said Naren.
Nilesh Shah, MD of Kotak Mahindra AMC, said in this improving market environment, investors must remember that mutual funds are a marathon, not a sprint.
“Short-term volatility is inevitable with global headwinds, but India’s macros – from consumption recovery to potential capex cycle revival – are firmly supportive. For the next 6-12 months, stick to SIPs like religion; they average out noise and build wealth silently,” said Shah.
Shah suggests preferring large-caps and quality flexi-caps for stability, while using balanced advantage funds to tactically navigate ups and downs.
Over the medium term of 2-5 years, this is the time to gradually increase equity allocation as corrections make valuations attractive.
Shah believes themes like private banking revival, telecom consolidation, pharma exports, rural consumption, and selective manufacturing will drive outperformance.
Don’t chase past winners in infra or defence; rotate to reasonably priced quality, says Shah.
Asset allocation is non-negotiable – blend equities with some gold and debt for protection.
“Moderate return expectations to low-teens; greed for 20%+ will hurt. Investors who stayed disciplined through past corrections are smiling today. Be optimistic, be patient – India’s growth engine is revving up, and mutual funds remain the simplest vehicle to ride it. Chhoti SIP se badi wealth banegi,” Shah emphasises.
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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, 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.
