Shah explains how global geopolitics, US Federal Reserve actions and central bank policies will remain the key drivers of precious metals prices, even as broader markets shift focus to earnings, valuations and stock-specific opportunities. Edited excerpts –
Q) Thank you for taking the time. We hit new all-time highs in November, with a 10% gain so far this year. How are we positioned for 2026?
A) Earnings prospects for the frontline index next year are expected to be in the mid-teens, on a good macroeconomic backdrop, with a declining trend in the fiscal deficit and an improvement in the trade deficit due to falling crude oil prices. Current valuations are close to the long-term average.
Excesses have started to correct themselves. GST and income tax reforms will come into effect in FY27. The attraction of capital investment, the trade deal with tariffs and the depreciation of the rupee are important factors that can be monitored.
Going forward, a stock-specific approach will be necessary as there are value areas with growth triggers.
Q) Gold and silver outperform by a wide margin in 2025. How will precious metals develop in 2026? Are there triggers to look out for?
A) Gold and silver have performed exceptionally well over the past 18 months; it is unlikely that they will experience such an exponential movement next year.However, much of their returns next year will depend on the global geopolitical situation, policy actions by the US Fed and global central actions in the gold and silver markets.
Q) The rupee made a new low against the USD and crossed the 90 mark. Are we on track to cross the 100 mark against the USD? What causes the fall?
A) 2025 saw significant financial outflows from Indian equities and debt, with rising US interest rates and better opportunities for US assets. This has led to FII withdrawing capital from emerging markets including India.
The rupee may fall in the mid-90s, but crossing 100 against the USD will happen more gradually in a few years than the current sharp fall in the INR against the USD that we are currently seeing.
Q) Which sectors are likely to be in the spotlight in 2026? Sectors likely to lead a rally.
A) Discretionary consumption will perform well as liquidity in the hands of consumers increases thanks to direct and indirect tax dollars provided by the government.
Manufacturing and Infrastructure The industry should continue to do well thanks to government incentives, PLI programs and Make in India initiatives. Chemicals and other export-related sectors should see an improvement thanks to the weak rupee.
Q) Are there themes or sectors that have already emerged in 2025 and should investors better allocate their stake in those themes?
A) Popular sectors such as solar, BESS and defense have seen some excessive valuations. There is also a margin impact on solar equipment due to the oversupply situation in the market. Investors should rebalance their portfolios accordingly.
Q) Motherboard initial public offerings (IPOs) have crossed the 100 mark mark for the first time since 2007 (including SMEs), raising nearly Rs 2 lakh cr. What are your expectations for 2026?
A) The momentum of IPO funds in 2026 should continue as domestic fund flows are still strong. There is a good pipeline of companies that have filled DRHPs with SEBI, which will come to the market for fundraising next year.
Q) What were the most important lessons from the year 2025 that you would like to share with the readers?
A) The importance of discipline over conviction: Markets have reminded us this year that even strong structural narratives can underperform when liquidity and sentiment turn.
As a fund manager, it was much more important to stay anchored in process and risk management than chasing themes.
Across cycles, quality companies with strong balance sheets, pricing power and cash flows perform quietly while momentum trades fade. In many ways, 2025 has reminded us that compounding also builds in quiet phases, not just bull runs.
Q) What will be the big triggers for the stock markets in 2026?
A) Next year, the benefit of the RBI’s 125 bps rate cuts will be fully passed on by 2025, which will help generate more free cash flow for corporate investments and lower EMIs for consumers, leading to more money for consumption.
FII could also return next year as its market valuation has fallen to its long-term average and FII’s participation in the Indian market is at a decade low.
India The US tariff resolution will provide a major boost to exports, especially in India’s textile, chemical and precision components industries.
Q) If someone plans to invest, say, Rs 10 lakh by 2026 – what should be the ideal asset allocation for someone in the age group of 30-40 years?
A) Equities, especially in the small cap segment, have great value. Every investor has their own objectives and risk appetite. Therefore, asset allocation would depend accordingly.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by experts are their own. These do not represent the views of the Economic Times)
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