In the world of investing, few things are as constant as change, and yet, even the most seasoned investors can sometimes be blindsided by shifts in market dynamics. As we look ahead to 2026, one thing is becoming abundantly clear India’s equity markets are primed for a robust comeback after a challenging period of underperformance.
After years of impressive growth, India found itself facing a slowdown that has left many wondering if its economic juggernaut has lost steam. But as we enter the new year, the outlook for the Indian equity market is turning increasingly optimistic.
India’s stock markets had a tough last year, with underperformance relative to global peers, particularly in USD terms. In fact, the country witnessed its worst relative performance since 1993. This stark underperformance is even more staggering when we consider that markets around the world from the U.S. to emerging economies have been riding a bull market, delivering returns between 20 per cent and 70 per cent.
The reasons for this disconnect are multifaceted but can largely be attributed to three key factors:
a slowdown in economic growth, record-high valuations, and the global shift towards AI-driven investments, in which India was largely a passive observer.
However, from the beginning of November 2025, India’s equity performance turned decisively, outpacing global indices by nearly 300 basis points over the last month. This resurgence can be attributed to a combination of bold policy actions and a shift in global market sentiment.
India’s central bank, led by the Reserve Bank of India (RBI), initiated a series of rate cuts, marking a significant pivot from its earlier stance. In April 2025, the RBI not only cut rates but also reduced the cash reserve ratio (CRR) a move that has occurred only twice in India’s history. These policy measures, combined with easing regulatory pressure on the banking sector, have laid the foundation for economic revival.
Importantly, growth is already reflecting in the real economy, as evidenced by a strong 8.2 per cent GDP growth in Q2 of FY 2025–26. This indicates that the stimulus provided by the RBI is effectively percolating through the system, further supported by government reforms such as GST implementation and sustained infrastructure investment.
Furthermore, the narrative surrounding artificial intelligence (AI) — which had earlier acted as a headwind for India due to its limited direct participation — appears to be peaking. While AI-led stocks dominated global investor interest, much of the optimism now seems priced in. As this trade begins to cool, India stands well-positioned to benefit from capital rotation and renewed investor focus.
For investors, the message is clear: India’s equity markets, after a prolonged phase of underperformance, are preparing for a meaningful recovery. With supportive monetary policy, improving macro indicators, and a global environment conducive to growth, 2026 could mark the beginning of India’s next equity market upcycle.
For those who remained cautious on the sidelines, this is the moment to recalibrate and view India through a long-term lens. With valuations turning attractive and earnings growth expected to accelerate, Indian equities may emerge as one of the most compelling investment opportunities in the years ahead.
This is the time for investors to reassess, re-engage, and participate in the next phase of India’s growth story, guided by insights from seasoned leadership like Ranjit Jha (CEO) and the broader research-driven approach of
Rurash Financials.