Despite external challenges, Indian stocks remain resilient supported by strong corporate earnings, domestic liquidity, and a favourable policy environment, with expectations of a gradual climb towards 2026 amid bullish forecasts and external risks.
Indian equities are holding up better than many global peers, with the Sensex and Nifty staying near key levels even as investors weigh mixed overseas signals. In the Business Today video, the market’s resilience is linked to a blend of solid corporate earnings, a supportive Reserve Bank of India policy stance and easing geopolitical worries, although weekly expiry-related volatility is still adding noise to trading. The Nifty remains above 24,600, while small-cap shares continue to outperform larger stocks.
That strength comes against a broader backdrop of caution. Market commentary cited by LiveMint and Business Standard suggests investors are looking past short-term pressure and toward a possible earnings-led recovery, with foreign flows, domestic liquidity and a calmer policy environment helping to stabilise sentiment. Ajay Menon, quoted by The Times of India, said the combination of improving earnings, resilient domestic liquidity and normalising valuations could support a gradual upcycle in 2026.
Not everyone is focusing on the near-term chop. Morgan Stanley has taken a far more bullish view, saying the Sensex could climb to 107,000 by December 2026 in a bull-case scenario if oil stays below $65 a barrel, trade tensions ease and reflation policies lift growth. The firm also expects earnings to compound at 19% annually over FY25-FY28, framing Indian equities as a market with room to recover after a long stretch of relative underperformance.
Even so, the path higher is unlikely to be smooth. Economic Times reported that FY26 has already been a difficult year for Indian shares, with persistent foreign selling, weak earnings, high valuations and a softer rupee weighing on sentiment, while tensions in the Middle East have raised energy-price risks. That tension between strong domestic support and external fragility is likely to keep financials and select industrials in focus, while traders watch whether the current resilience can broaden into a more durable advance.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
