From the perspective of the Indian economy, 2025 was a year of preparation. Falling interest rates, controlled inflation, continued momentum in infrastructure development, the ability to convert tariff-related fears into strategic opportunities, and maintaining national confidence even amid geopolitical tensions together made the past year distinctly significant.
Against this foundation, expectations for 2026 are meaningfully higher for market participants. It is therefore important to examine how the economic changes that unfolded in 2025 could influence markets in the year ahead.
Last year, reductions in the RBI’s repo rate helped bring down borrowing costs. Liquidity-enhancing measures taken by the central bank, along with changes in income tax slabs in the 2025 Union Budget, increased disposable income in the hands of the middle class. Rationalisation of GST slabs supported improvements in corporate profit margins. The full implementation of the new labour codes and reforms in the shipping and logistics sectors are expected to provide a fresh boost to manufacturing.
The benefits of trade agreements signed with multiple countries are likely to begin reflecting in the balance sheets of export-oriented companies in the coming years. Another sector to closely watch in 2026 is public sector banking, where surprises are possible whether in the form of disinvestment, consolidation, or mergers.
The single most important factor markets are watching in 2026 is private sector capital expenditure. While growth in recent years has largely been driven by government spending, the cumulative impact of the factors mentioned above could now trigger a shift toward private investment. Such a transition is critical for a sustained market breakout. If this materialises, capital goods, engineering, cement, and steel companies stand to benefit significantly.
Other sectors likely to gain from these developments include banking, automobiles, housing finance, IT, pharmaceuticals, consumer goods, retail, tourism, infrastructure, and manufacturing. The slogan “Make in India” is visibly evolving into “Make for the World.” Global leaders across electronics, mobile phones, and several other segments have already begun manufacturing in India. Encouraged by this shift, many foreign companies are actively reassessing their dependence on China.
Additionally, opening up the highly sensitive defense manufacturing sector to private players has further enhanced India’s manufacturing potential combining lower production costs with growing global trust in India as a reliable manufacturing destination.
While foreign investors sold nearly ₹2 trillion worth of equities last year, domestic institutions purchased more than three times that amount. Importantly, another set of sellers in the market included promoters and venture capital funds. This is not inherently a positive signal. When such selling occurs in stocks that have already seen excessive price appreciation, caution is warranted. This phase therefore also presents a good opportunity for portfolio rebalancing and pruning.
Turning to the outlook for the Nifty, the index ended the first week of the new year at an all-time high, closing at 26,328. In the near term, the first support level to watch is 26,211. If this level is breached, the 25,969–25,726 zone becomes the next critical support range. Conversely, if Nifty holds above 26,211 and manages a close above 26,455, the next upside targets to watch would be 26,502–26,987.