Gold, Silver Outlook 2026: Central Bank Support, EV Demand
Shah noted that gold prices continue to find support from continued central bank purchases, while silver is benefiting from rising industrial demand, especially for electric vehicles and clean energy applications. However, he warned that silver, as an industrial commodity, is vulnerable to substitution if prices rise above reasonable levels.”Investors should closely monitor central bank activity through global data such as World Gold Council reports. As long as central banks continue to buy, gold prices will remain supported,” he said.
Stock markets 2026: profits, not valuations, determine returns
On the equity front, Shah believes that a valuation-based revaluation for Indian markets appears difficult as largecaps, midcaps and smallcaps are already trading at premiums to historical averages and global peers.
According to him, earnings growth will be the key driver of returns in CY26 and beyond, aided by structural reforms and double-digit earnings outlook for CY26 and FY27.
Midcaps are expected to outperform due to relatively stronger earnings growth and valuations closer to fair value.
Large caps can deliver stable returns that match earnings growth. Small caps could underperform as they continue to trade at a high premium.
Bottom-up stock selection will dominate
Shah expects 2026 and 2027 to be defined by bottom-up investments, with winners and losers emerging within sectors based on dealmaking, technology adoption and access to capital.
In new-age sectors, he highlighted two key requirements for success:
- Access to sustainable capital
- A clear path to profitability
IT sector: buying ahead of a software revival
Commenting on the recent rally in IT stocks, Shah dismissed the idea that the rupee’s depreciation would drive margins in the longer term. Instead, he said the optimism is tied to future opportunities in AI software.
“Currently, most investments are going towards AI hardware such as GPUs. Once that curve flattens, spending will shift to software, where Indian IT services providers can play a meaningful role,” he said, adding that markets are “buying into the news”.
Sector overview 2026: PSU banks, pharmaceutical rotation; prudence in real estate
PSU banks: Shah sees further room for valuation expansion as net interest margins bottom out and earnings growth continues.
PharmaHe expects a sectoral rotation, mainly favoring domestic and CDMO players, while generic exporters to the US may lag behind.
Property: Shah remains cautious, warning that apparent demand may be overestimated by counting redevelopment sales as new demand.
IPOs and liquidity: key valuation discipline
With a strong IPO pipeline expected in 2026, Shah believes primary market offerings have helped channel liquidity at reasonable valuations. He advised investors to evaluate IPOs with the same care as listed stocks, focusing on the quality of management, fundamentals and valuations, rather than short-term profits.
Risks to watch: global events, geopolitics
While acknowledging the risks of tariffs, geopolitical tensions and foreign investor flows, Shah said markets typically ignore known events. In the long term, such shocks generally have a limited impact on the intrinsic value.
“Equity investors are looking at the next 10 to 20 years, not just one or two quarters,” he said.
Important advice for investors in 2026
Shah’s message to investors remains clear: “Follow the dharma of asset allocation.”
He mentioned the Kotak Multi-Asset Allocation Fund as an example, with roughly:
- 23% in gold and silver
- 57.5% equity
- The balance of the fixed-income securities
“Transparency and disciplined allocation are more important than chasing returns,” Shah concluded.
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