Stock market outlook: The Indian stock market experienced a highly volatile 2025, driven by relatively high valuations, delays in the India–US trade deal, and significant FPI outflows. The Nifty 50 rose a modest 10.5% during the year but recorded its largest underperformance against Asian peers in nearly three decades.
2026 has started on a turbulent note for the indices. On a year-to-date (YTD) basis, the benchmark Nifty 50 index has lost more than 1%, and the BSE Sensex has dropped 1.18%. In trade today (8 January), India’s benchmark shares logged their steepest one‑day fall in over four months, amid uncertainty over US tariffs.
Where should investors park money in 2026?
Analysts at Shriram Wealth, in their recent outlook report for the year 2026, cautioned about the Indian stock market valuations remaining higher than the long-term averages. However, the extent of the overvaluation has moderated in the last 15 months, they noted.
To manage risk and optimise returns, investors should diversify their portfolios across different segments, including large-cap and flexi-cap funds and multi-cap funds.
They also recommend people to invest in hybrid funds such as Balanced Advantage, Multi-asset, among others, which appear better placed on a risk-reward basis.
Investors who are looking to allocate their money into mid-cap and small-cap funds should do so in a “staggered manner,” i.e., invest their money over a period of time and not in a lump sum format.
“Investors should also consider diversifying a portion of their portfolios (around 10-15%) into Global Equities to benefit from opportunities across diverse sectors such as Tech, Healthcare, etc,” the experts noted in the outlook report.
US market investment in focus
As the experts recommended that investors keep a 10-15% portfolio weightage in global equities, the artificial intelligence (AI) stocks accounted for nearly 80% of the gains for the US markets in 2025.
The ‘magnificent seven’ group of companies in the US market, namely, Apple, Tesla, Alphabet, Amazon, Meta Platforms, Microsoft and Nvidia, have been a critical driver for earnings growth and a contributor to the S&P 500’s market cap rise.
“Despite the disappointments from Tesla and Meta Platforms, the rest of the group picked up the slack. Alphabet, Microsoft, and Amazon continued to support the thesis that demand for AI is driving robust growth and is lifting the market indices,” according to the Shriram Wealth report.
Shriram Wealth’s 2026 outlook report also suggests that valuations for the European equities remain more attractive relative to US stocks as the International Monetary Fund (IMF) predicts the eurozone to record moderate growth of 1.1% in 2026.
Read all stories by Anubhav Mukherjee
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.
