The Indian equity market enters 2026 at a pivotal junction, transitioning from a phase of consolidation toward a more structured growth trajectory. The current environment is shaped by significant monetary easing, landmark regulatory reforms, and a robust push toward domestic self-reliance. From the resurgence of consumer demand to the structural overhaul of the insurance and defence sectors, specific pockets of the market are now poised to lead the next leg of India’s economic expansion.

Consumer Discretionary: Consumption-related sectors have seen mixed performance in recent years, influenced by income trends, inflation, and demand conditions. More recently, segments such as QSRs, building materials, and automobiles have shown signs of changing momentum, supported by policy measures, tax adjustments, and evolving consumer behaviour.

Financials: Key growth triggers and recent government policies for the NBFC sector in India include aggressive interest rate and CRR cuts in 2025, priority sector lending reforms, and regulatory relaxation for gold loan and microfinance NBFCs. Lower repo rates and reduced CRR have infused significant liquidity, making funds cheaper and supporting expansion in retail credit, such as vehicle, personal, and gold-backed loans.

The government is moving swiftly to allow full foreign ownership in the insurance sector, bringing more capital, technology, and competition to the industry. Following GST rate cuts, the government has exempted GST on individual life and health insurance policies. The insurance bill enabling 100% FDI was approved by Parliament in Dec-25.

Metals: In 2025, real assets such as steel, aluminium, copper, and rare earth minerals have shown varied performance influenced by production restrictions, geopolitical trade tensions, and persistent Chinese demand (especially for clean energy and infra). Alongside strong macroeconomic tailwinds like a weakening US dollar, expectations of central bank rate cuts, high inflation, ongoing geopolitical uncertainty, and robust industrial demand (notably for copper and silver).

The outlook for India’s metals industry remains positive, underpinned by strong economic growth and rising domestic demand. India is set to emerge as a key global growth engine for basic metals, with production projected to expand by 6.1% in 2025 and 6.5% in 2026. Unlike China’s export-driven model, India’s growth is rooted in robust domestic consumption, particularly from construction and industrial activity.

Defence: India’s defence sector presents a compelling investment opportunity and has been on an upward growth trajectory due to diverse growth drivers and long-term execution visibility. Some of the key driving factors are:

• Robust order books and a healthy pipeline supporting sustained growth visibility,
  

• Allocation of 75% of the defence procurement budget to the domestic industry,
  

• The Defence Production and Export Policy 2020 is a stride towards Aatmanirbhar Bharat, seeking to double India's aerospace and defence industry in just five years. (Source:Phillip Capital Research Report)
  

Final thoughts

The year ahead is likely to reflect a combination of resilience and structural change within the Indian economy. Policy initiatives supporting domestic manufacturing, financial sector reforms, and evolving demand conditions continue to shape sectoral dynamics. While global developments may introduce periods of volatility, domestic economic factors remain an important consideration in assessing market conditions.