2026 Indian Equities: Modest Gains, High Stakes Ahead, Warns Abakkus Chief

Sunil Singhania, founder of Abakkus Asset Management, projects Indian equity markets to deliver returns in the low-to-mid teen percentage range for 2026. However, he cautioned investors that the coming year will demand stringent discipline and precise stock selection, offering little tolerance for mistakes or speculative bets. The era of easy market gains is drawing to a close as the macroeconomic environment improves.

Navigating the Shift

Singhania advised investors against chasing stocks based solely on price momentum, even with a generally supportive economic backdrop. "This is not the year where you can afford to make too many mistakes," he stated. While Indian equities posted around 10% returns in 2025, lagging some global counterparts after a strong run from 2020-2024, Singhania sees positive signals for 2026. These include economic recovery, anticipated interest rate cuts, abundant liquidity, and robust corporate balance sheets.

Corporate profit growth, currently around 10%, is expected to approach its long-term average of 14-15%, forming a solid foundation for equity performance.

Sectoral Convictions and Cautions

Singhania reiterated a strong conviction in the pharmaceutical sector, despite recent underperformance. He sees significant "moats" and opportunities in both domestic and global-facing Indian pharmaceutical companies. Financials, encompassing banks, non-banking financial companies (NBFCs), asset management firms, and insurers, also remain an area of optimism due to their integral role in India's economic expansion.

While metals have seen impressive gains buoyed by strong balance sheets and India's cost-competitiveness, Singhania prefers to limit exposure to these cyclical assets to under 10% of portfolios. Specialized engineering, after a year-long correction, presents attractive growth drivers from domestic themes like defense and railways, as well as export markets.

Conversely, Singhania adopted a defensive stance on IT services. He believes the sector's previous growth phase of 10-15% is unlikely to return, citing persistent headwinds such as visa issues, US economic uncertainty, and the disruptive potential of artificial intelligence.

IPOs and Geopolitical Risks

Regarding the recent surge in Initial Public Offerings (IPOs), Singhania advocated for careful selectivity rather than outright avoidance or blind participation. As India's economy grows, new-age businesses will become increasingly vital, and IPOs remain the primary avenue for investment. However, identifying companies that will endure requires rigorous analysis, with valuations heavily influenced by demand and supply dynamics. His firm maintains an extremely selective approach.

Singhania no longer views geopolitics as the primary concern, as markets have adapted to global tensions. His main flagged risk is the ongoing tariff dispute with the United States. "We can't afford this tariff thing to get out of hand," he warned, emphasizing the need for a resolution given that the U.S. is the world's largest economy and a significant export destination for India, with trade valued at approximately $100 billion.