Indian Stock Market Outlook 2026: Is Fear the Best Buy Signal?

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With equities lagging FDs, gold and U.S. markets in 2025, analysts say extreme pessimism could set the stage for stronger returns in 2026.

By S JHA

Mumbai, December 29, 2025 — After more than one years of almost no returns, equity market analysts are speculating the outlook for 2026 for the Indian markets. Market participants state that while stock indices are at higher levels, most of the stocks are still reeling under a heavy spell of corrections.

So much so that even the bank fixed deposits gave better returns than the equity markets, say analysts. Geopolitical uncertainties continue to keep equity markets on the edge. Trumpian disruptions in global trades also hang over the markets. While equities underperfomred in India, precious metal have been ruling the charts.

Devina Mehra, founder of First Global, in a post on X sought to answer the question in the minds of investors: Kya lagta hai market? “This year there is something that gives me a pointer towards what may happen in Indian markets. Recently I see most talking heads on television listing out the risks in the market,” wrote Mehra.

She stated that “most investors are questioning themselves as to why they are investing in Indian stock markets when everything from fixed deposits to Gold to US markets have given better returns this year.”

“After all the Indian market has been in the bottom 10% of global markets this year. The sentiment is clearly downbeat—partly because the average stock has not even done as well as the headline indexes—for instance while the Nifty and the BSE 500 are up the median stock is down for the year,” she stated.

But Mehra sought to lift sentiments of investors, as she noted that “sentiment is a contra indicator—when there is uncertainty, fear, anxiety and questions like the kind we are seeing today—the next period returns on the average are above normal.”

“When the 30% returns appear to be available for the taking as was the case in the first 8-9 months of 2024 is when you should be wary. From the 2024 Diwali to the next, the market gave no returns. Going by this yardstick, the returns in 2026 may well be better than what we have seen off late,” added Mehra.

She argued that “history shows that sharp up moves in markets come at the time of such despondency. So, the lesson is to remain invested to the extent of your equity allocation which—like a broken record let me repeat—should not be 100% of your investment portfolio.”

(Disclaimer: This article makes no recommendation for any kind of stock decision.)