CLSA's Laurence Balanco has presented a measured yet optimistic outlook for Indian equities, identifying specific technical levels that could unlock significant upside potential for both benchmark indices and the mid-cap segment. His analysis comes at a time when Indian markets are navigating a consolidation phase while building momentum for potential breakouts.

Nifty Technical Outlook and Key Levels

Balanco describes the current environment for Indian equities as one of consolidation, with the benchmark Nifty trading within a well-defined range. The technical framework he has identified shows clear parameters for potential upside moves.

According to Balanco, a decisive break above 26,300 would open up targets of 27,800 and subsequently 28,800, representing significant upside potential from current levels.

Mid-Cap Opportunity with 30% Upside Potential

Balanco's stronger conviction lies with the mid-cap segment, where he sees a more compelling opportunity developing. The mid-cap space has been consolidating for nearly 24 months, creating what he views as a powerful setup for potential outperformance.

"We've been consolidating there for nearly 24 months, and I think a meaningful break through the 62,000 area for the midcap space gives us upside of over 30%," Balanco stated. He noted that the NSE Midcap Select index has already cleared the upper boundary of its consolidation pattern, suggesting early signs of the anticipated breakout.

Regional Market Dynamics and 2026 Structure

Balanco characterizes 2026 as having a "boom-bust structure" for Asian markets, with distinct phases that could impact capital flows and relative performance. He expects the first half of the year to be dominated by a boom in tech-heavy North Asian markets such as Korea and Taiwan, which could temporarily attract flows away from India.

However, his outlook suggests this leadership will reverse in the second half of the year, as those markets roll over and India emerges from the shadow. This rotation is expected to allow Indian equities, particularly mid-caps, to regain momentum and potentially outperform during the latter part of 2026.

Commodities and Precious Metals Outlook

Balanco's constructive view on Indian markets is reinforced by his outlook on commodities, which he sees as supportive of the broader investment theme. Base metals began breaking out in late 2025, a trend he expects to continue through 2026.

In precious metals, while Balanco expresses caution on silver following its sharp rally, he maintains a bullish stance on gold with an unmet measured target in the $5,100 to $5,200 zone.

Dollar Weakness Supporting Emerging Markets

Underpinning Balanco's positive outlook for emerging markets, including India, is his conviction that the US dollar has entered a major bear market. He pointed to the Dollar Index breaking below the critical 100 level as confirmation of a major top formed between 2022 and 2025.

"The break below 100 suggests that we now have a major dollar top in place," Balanco explained, adding that this opens up a downside target of 89 to 90 on the DXY, representing another 10% decline from current levels. Drawing on historical cycles since the 1970s, he noted that dollar bear markets typically last five to seven years and can result in declines of 40-50%, suggesting the current weakness may only be beginning.

The Nifty resumed its corrective decline on Monday, falling 108.85 points to close at 25,585.50, marking its lowest level in the ongoing correction. The benchmark has now slipped nearly 3.00% from its all-time high of 26,373, with weak quarterly earnings from index heavyweights and renewed global trade tensions driving the broad-based sell-off.

Market Performance Overview

The index opened with a downside gap and came under sharp selling pressure soon after the opening bell. The Nifty briefly touched an intraday low of 25,494 before staging a partial recovery that failed to sustain. The Sensex declined 324.17 points to settle at 83,246.18, reflecting widespread weakness across market segments.

Top Gainers and Losers

Market breadth remained sharply negative for the seventh consecutive session, with 3,116 stocks declining against 1,186 advances on the BSE. Notably, 438 stocks hit 52-week lows, compared with just 97 that hit 52-week highs.

Sectoral Performance and Global Factors

All sectoral indices closed in the red except Nifty FMCG, which rose 0.70%, and Nifty Auto, which edged up 0.10%. Nifty Realty shed over 2.00%, while Media and Oil & Gas indices declined 1.80% and 1.60% respectively.

Global cues remained weak as Japanese government bond yields surged, with the benchmark 10-year yield climbing to around 2.30%—the highest level since February 1999. Risk appetite was further dampened after renewed trade-related rhetoric from the US, with Trump reiterating plans to levy taxes on European countries.

Currency and Commodity Movements

The Indian rupee extended its losing streak, weakening by 5 paise to close at 90.91 against the dollar, its lowest level in a month. In commodities, silver crossed the historic ₹3.00 lakh per kg mark, reflecting intensifying safe-haven demand amid geopolitical tensions and global macro uncertainty. Gold also traded positively as rupee weakness and geopolitical concerns supported safe-haven demand.

Technical Analysis and Market Outlook

Technically, the Nifty remained under bearish control, sustaining below its 20-day EMA throughout the session. According to analysts from HDFC Securities, a decisive breach below the 25,473 marks would violate the current consolidation range, potentially accelerating the slide toward the next major support at 25,318.

Markets are expected to trade sideways, tracking global cues and ongoing earnings developments. However, any escalation on the geopolitical front could remain a key overhang for market sentiment. The focus remains on how well the index defends the crucial 25,500 support level in upcoming sessions.