Dipan Mehta Expects 2026 Market Recovery After Disguised Bear Market in 2025
Dipan Mehta of Elixir Equities describes 2025 as a disguised bear market with over 70% of NSE stocks posting negative returns. He anticipates 2026 recovery driven by export-oriented sectors including IT services, pharmaceuticals, and textiles. Mehta favors auto stocks like Mahindra & Mahindra and Eicher Motors while turning positive on IT services after underperformance.
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Market expert Dipan Mehta of Elixir Equities characterizes 2025 as a "disguised bear market" despite headline indices posting modest gains, with over 70% of NSE stocks delivering negative returns and nearly 40% correcting over 20-25%. Speaking to ET Now, Mehta believes 2026 could mark a meaningful turnaround driven by earnings revival, selective stock picking, and a shift towards export-oriented sectors.
Market Performance Analysis
Mehta highlighted the challenging market conditions that defined 2025, noting that many portfolios have taken significant hits despite seemingly positive index performance. He emphasized that such phases often set the stage for strong recoveries, positioning 2026 as a potential year of meaningful market turnaround.
| Market Indicator | 2025 Performance |
|---|---|
| NSE Stocks with Negative Returns | Over 70% |
| Stocks Corrected 20-25% | Nearly 40% |
| Overall Market Character | Disguised Bear Market |
Sector Preferences and Stock Picks
Auto Sector Leadership
Auto stocks emerged as standout performers in 2025, supported by GST rate rationalization and improving volume growth. Mehta remains optimistic about the December quarter and beyond, citing premiumization trends and robust demand.
His preferred picks include:
- Mahindra & Mahindra: Favored in passenger vehicles due to EV strategy, market share gains, and disciplined capital allocation
- Eicher Motors: Preferred in two-wheeler space, supported by volume recovery and strong export potential
Defence Sector Caution
While defence stocks continue benefiting from strong order books and policy support, Mehta struck a cautious note regarding valuations. He advised investors to accumulate PSU defence stocks such as Bharat Electronics and HAL only on corrections, citing execution risks and earnings volatility concerns.
IT Services Turnaround
Mehta's outlook on software services has turned positive after a period of underperformance. He expects IT stocks could see a strong trading rally in 2026, driven by rupee depreciation and rising AI-linked revenues across large and midcap segments.
2026 Investment Themes
Export-Oriented Sector Focus
Looking ahead, Mehta expects a strategic shift from domestic-focused themes of 2025 to export-oriented businesses in 2026, especially if trade uncertainties ease. Key beneficiary sectors include:
| Sector | Key Companies | Growth Drivers |
|---|---|---|
| Pharmaceuticals | Lupin, Sun Pharma, Ajanta Pharma, Biocon | Domestic growth, recent acquisitions |
| Textiles | Gokaldas, Welspun, Indo Count | Global demand recovery potential |
| IT Services | Large and midcap players | Rupee depreciation, AI revenues |
Metals Sector Outlook
Mehta urged investors to moderate return expectations from metals due to their cyclical nature. While steel may see intermittent trading rallies, he believes non-ferrous metals offer better long-term potential. His preferred plays include Vedanta, driven by value unlocking through demerger, and Hindalco due to low-cost operations and exposure to aluminium, copper, zinc, and silver.
Investment Philosophy and Asset Allocation
Despite gold and silver outperforming equities in 2025, Mehta emphasized that asset allocation remains a timeless strategy. He revealed his long-standing preference of being 100% invested in equities, with 50-60% allocation in midcaps, noting that staying loyal to one asset class has worked over three decades.
Regarding quick commerce stocks, Mehta remained constructive on leaders like Swiggy and Eternal while keeping an open mind on upcoming IPOs such as Zepto, viewing them as long-term structural stories requiring patience and small allocations.
Market Outlook
Mehta believes 2026 will reward disciplined investors who focus on earnings recovery, valuation comfort, and sector rotation. He expects selective opportunities rather than a broad-based rally, emphasizing that patience and conviction will be key to generating alpha in the year ahead.
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