India could be headed for a “Goldilocks year” in 2026, with strong growth, falling rates, a stable rupee, and easing global risks creating a favourable environment for equities, according to a report by HDFC Securities released on Saturday.

The brokerage expects double-digit nominal GDP growth, improving corporate earnings, and supportive monetary policy to drive market gains, led by sectors such as metals, banking and financial services (BFSI), capital goods and defence.

HDFC Securities has set a Nifty 50 target of 28,720 by the end of 2026, with expected returns of around 11 per cent. It projects Nifty earnings growth of about 16 per cent in FY27, supported by improving demand and easing financial conditions.

The report said the RBI and government’s reflation push through interest rate cuts, CRR reductions, and liquidity infusion is expected to strengthen domestic consumption and investment momentum in 2026.

Global risks easing, India-US trade deal in focus

The brokerage expects global trade uncertainty to ease, helped by tariff rollbacks and a potential India-US trade agreement in early 2026, which could further boost investor confidence.

Corrected stock valuations and historically low foreign portfolio investor (FPI) positioning also create room for upside, including short covering. Meanwhile, strong retail investor participation, driven by record SIP inflows and rising demat accounts, continues to provide market support.

Sector winners in 2026

According to the report, the metal sector has the strongest structural tailwinds, backed by infrastructure spending, capacity expansion, and a global commodity upcycle.

Capital goods stocks are expected to benefit from sustained public capex, though valuations remain a concern. The report also sees an AI-led recovery in IT stocks in the second half of 2026, along with a gradual revival in consumption, with premiumisation supporting margins.

Risks to watch

HDFC Securities warned that disappointment around AI-led growth expectations could trigger market volatility, although the long-term investment cycle remains positive. Other risks include high global debt levels, potential credit events, and a heavy IPO pipeline exceeding Rs 2.5 lakh crore, which could drain liquidity from secondary markets.

 

IANS inputs