“Valuations remain a key consideration in the 2026 outlook. While the long-term growth prospects for Indian equities remain intact, elevated valuations and moderation in near-term earnings growth warrant a calibrated approach to equity exposure,” the CA note said.The assessment expects earnings growth for Sensex companies to remain subdued in the near term, followed by a recovery in the medium term on improving macro conditions and accommodative monetary policy.
Client Associates (CA) is a multi-family office (MFO) founded by Rohit Sarin and Himanshu Kohli. With more than two decades of industry experience, the company claims to manage more than $7 billion in assets. The company provides consultancy services to HNIs and Ultra HNIs across India, with a presence in 10 major cities.
The estimates are based on Sensex’s intrinsic value assessment and a multi-factor framework. Indian equity markets will be supported by strong macroeconomic activity, proactive policy measures and an eventual recovery in earnings through 2026, although global uncertainties are likely to limit the upside in the near term, the note said.
Liquidity conditions remain supportive, with domestic institutional investors playing an increasingly important role in stabilizing markets. Strong and sustained SIP inflows have helped offset periods of foreign portfolio outflows, and renewed participation from institutional investors could increase market depth and reduce volatility, especially during the global risk phase.
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GDP growth for FY26 has been revised upward to 6.8%, exceeding expectations set earlier this year amid increased geopolitical uncertainty.
“This growth trajectory translates into sustained domestic demand, better visibility into corporate revenues and improved earnings potential in consumption-led sectors. High-frequency indicators, including manufacturing and services PMIs, remain in expansionary territory, while GST collections reflect the resilience of underlying economic activity,” the CA note said.
Nitin Agarwal, Head of Investment Research at Client Associates, believes that in 2026, equity markets are likely to be driven more by selective opportunities anchored in fundamentals and less by broad-based rallies. India’s domestic macro strength and improving earnings outlook remain supportive, but high valuations and global uncertainties call for a disciplined approach, he said, underscoring the importance of asset allocation over market timing.
Raw materials are central
Agarwal said gold and silver remain strategic allocations and will be a key theme in 2026.
Precious metals performed strongly through 2025, with returns of around 60% for gold and 150% for silver, supported by a weaker dollar, geopolitical uncertainty and changing monetary dynamics.
Demand for gold rose significantly, driven by central bank purchases, reinforcing its role as a strategic portfolio diversifier, while silver prices rose sharply amid global supply concerns and geopolitical developments, Agarwal said.
Client Associates remains underweight on silver and advises against entering new positions at current levels as the risk/reward ratio is currently unfavorable.
(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times.)
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