“CY26 could be a better year for the broader Indian markets as corporate earnings and FPI flows may make a comeback,” the broker said, adding that India’s “Goldilocks” phase is likely to continue. This outlook is supported by policy measures already taken by the government and the Reserve Bank of India, along with the expected finalization of bilateral trade agreements with the US and EU.
Profit is central again
Antique’s central thesis rests on a profit-oriented market, rather than further multiple expansion. The brokerage said its analysis shows corporate earnings are positively correlated with wholesale price inflation and nominal GDP growth, both of which are expected to normalize in FY27. As a result, it expects a broad-based earnings recovery, with electronics manufacturing services, telecom, industrials and retail among the strongest performers, while oil and gas, information technology services, energy companies, FMCG and automotive are likely to lag.
The brokerage also flagged a moderation in the pace of earnings cuts for large-, mid- and small-cap stocks over the past four quarters, calling it an important early signal that the earnings cycle may be turning.
Sector Calls: Capital Investments and Financial Services
Antique believes the capital spending theme will make a comeback after two years of slowdown due to budget constraints and trade uncertainty. It said all parameters in its internal investment framework – ranging from global monetary conditions to domestic policy support – are now turning favorable. The brokerage is overweight capital goods, defense, electronics manufacturing services and select real estate companies, citing improved earnings visibility, relatively attractive valuations and under-ownership by institutional investors.
Financial services remains another core pillar of the strategy. Antique expects banks to enter an earnings cycle in CY26, supported by a strong domestic macro backdrop and the impending end of the rate cut cycle. It continues to favor the PSU banks, noting that they offer comparable loan growth, return on equity and asset quality to retail lenders while trading at an estimated discount of 45%. Asset managers and insurance companies are also favored given expectations of continued growth in equity assets under management and a long road to insurance penetration.
Consumption selective, midcaps in the longer term
Antique, on the other hand, remains underweight the broader consumer sector, except for selected discretionary sectors. It cited high valuations, heavy institutional positioning, increasing competition and changing consumer preferences as reasons for caution. Within consumption, the trend is selectively positive for alcoholic beverages, jewelry retailing, hotels and parts of the automotive sector.
On mid- and small-cap stocks, the brokerage took a more nuanced tone. While valuations remain high after years of outperformance, Antique said growth-adjusted valuations appear more reasonable and argued that investors should extend their time horizons. It expects earnings growth of the mid- and small-cap indices to outpace that of the Nifty over the next two to three years, driven by greater exposure to domestic cyclical stocks and a revival in capex.
Top Stock Picks
Antique’s top stocks include ICICI Bank, State Bank of India, Hindustan Aeronautics, Adani Power, HDFC Life Insurance, HDFC Asset Management, Solar Industries, HPCL, BHEL and Mazagon Dock Shipbuilders. In the midcap space, it favors Siemens Energy India, Hitachi Energy, Coromandel International, Nippon Life India Asset Management and Radico Khaitan. Small business preferences include Chalet Hotels, Sobha, Syrma SGS Technology and Transformers & Rectifiers India.
Flows and valuations
After foreign portfolio investors pulled out about $17.5 billion from Indian equities in CY25, Antique expects capital flows to stabilize and possibly rebound in CY26. It pointed to low FPI ownership, reasonable relative valuations and India’s low market beta as supporting factors, while warning that the continued global preference for AI-connected markets remains a key risk.
Despite Indian equities becoming pricier than historical averages, Antique says valuations may remain buoyant due to lower bond yields and sharp sectoral divergence, with almost half of Nifty 500 stocks having already corrected more than 20% from their 52-week highs.
(Disclaimer: 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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