After a volatile 2025 marked by sharp rotations and uneven global performance, Indian equity markets are entering 2026 with a fundamental shift in leadership dynamics. JM Financial 's Managing Director & CEO Dimplekumar Shah expects the coming year to reward quality businesses with strong balance sheets, high return ratios, and visible earnings growth.

Market Outlook and Return Expectations

Shah anticipates Indian equities will deliver moderate double-digit returns of 12-15% in 2026, broadly aligned with earnings growth. This represents a transition from momentum-driven returns to earnings-led valuation expansion. The Nifty-50 one-year forward PE at 21x remains slightly above its long-term average of 20.4x.

Markets are expected to favour quality companies exhibiting strong growth, high return on equity (ROE), and low leverage, with technical indicators supporting a continued uptrend.

Sectoral Opportunities for 2026

Shah identifies several sectors positioned for outperformance based on fundamental and technical analysis:

High-Conviction Sectors

NBFCs lead the list with healthy disbursement growth, improving asset quality, and margin expansion, with further gains expected in the second half of FY26. Auto & Auto Ancillaries are positioned for volume-led growth supported by GST cuts, income-tax benefits, and lower interest rates.

Telecom benefits from structural tailwinds including tariff hikes and rising home/enterprise broadband penetration, while selective healthcare stocks are boosted by lifestyle disease trends and increasing health insurance penetration.

Technical Favorites

From a technical perspective, IT, Pharma, Metals, and Infrastructure sectors display robust chart formations indicating sustained leadership potential. Auto and PSU Banks continue reflecting encouraging bullish patterns across timeframes, having generated impressive returns from mid-2025 onwards.

Precious Metals Outlook

Gold and silver delivered exceptional returns in 2025, with gold gaining 65% and silver surging 127%. The performance was driven by US trade tariffs, geopolitical risks, and structural silver supply deficits due to AI and solar PV demand.

For 2026, the outlook remains constructive with expected US Fed rate cuts and rising ETF inflows supporting higher prices. However, Shah cautions that easy gains are behind us, with potential corrections from AI bubble concerns or geopolitical de-escalation.

Currency and Market Risks

The Indian rupee faced pressure in 2025, declining over 5% and surpassing the 90 mark against the USD. Shah expects the currency to remain in a broad range of 89-95 in 2026, supported by RBI's robust foreign exchange reserves of $689 billion and relatively benign crude oil prices of $60-65 per barrel.

Sectors to Trim

Shah advises reducing exposure in certain overvalued segments:

• OMCs where valuations have moved above historical price-to-book levels
• Railways and Defence where prices have run ahead of earnings potential
• Loss-making Internet/Platform stocks facing rising competition and market share pressures

Investors should consider partially booking profits while preserving core positions, with any 3-5% index pullbacks creating attractive re-entry opportunities.

IPO Market Expectations

The IPO cycle should remain robust in 2026, with 192 companies seeking to raise over ₹2.55 lakh crore. The pipeline includes marquee listings such as Reliance Jio, NSE, and Flipkart. However, with average listing gains of just 9.4% in late 2025, investors are likely to be more valuation-conscious going forward.

Key Market Triggers

Shah identifies three critical factors that will drive equity market performance in 2026:

• Earnings recovery trajectory with Nifty-50 earnings CAGR of 15-16% expected in FY27
• Global trade dynamics, particularly US-India relations and energy price stability
• Inflation trends and central bank rate-cut cycles both globally and domestically

JM Financial Limited has received an ESG rating of 66, classified as "Strong," from ESG Risk Assessments and Insights Limited (ESG Risk.ai), a SEBI-registered ESG Rating Provider under Category I. The company disclosed this development to the stock exchanges on January 1, 2026, in compliance with Regulation 30 of the SEBI Listing Obligations and Disclosure Requirements (LODR).

ESG Rating Details

The ESG assessment was conducted based on data pertaining to FY 2024-25, with the company receiving the report on December 31, 2025. The rating evaluates the company's performance across Environmental, Social, and Governance parameters.

Independent Assessment

JM Financial Limited clarified that it had not engaged ESG Risk.ai for the ESG rating process. The rating provider independently assigned the ESG score based on information available in the public domain. This approach reflects the growing trend of unsolicited ESG assessments by rating agencies to provide market participants with sustainability insights.

Regulatory Compliance

The disclosure was made pursuant to Regulation 30 read with Para A, Part A of Schedule III of the SEBI Listing Regulations and SEBI Master Circular dated November 11, 2024. Company Secretary and Compliance Officer Hemant Pandya signed the disclosure document, ensuring proper regulatory compliance.

Market Context

ESG ratings have become increasingly important for investors and stakeholders in evaluating companies' sustainability practices and long-term viability. The "Strong" rating of 66 indicates that JM Financial Limited demonstrates robust performance across environmental, social, and governance metrics based on publicly available information.