Stock Market Outlook 2026: Indian equity benchmarks hovered near 23,700 as investors tracked concerns around a potentially deficient monsoon while also weighing fourth-quarter earnings momentum across sectors.
As of 11:15 am, the National Stock Exchange’s (NSE) benchmark, Nifty 50, was trading 0.2 per cent or 59 points higher at 23,606.85. Around 100 points below the 23,700 mark.
Created with AI. Errors are possibleAccording to Pankaj Pandey, Head of Research at ICICI Direct, while exclusively speaking to ET Now , a weak monsoon may create pressure for select companies dependent on rural demand, though the broader market impact is likely to remain limited.
“I think pre-low-level monsoon definitely would be a challenge, but historically what we have seen is that the overall agri-production does not get impacted so much because not everything is rain-fed.”
Pandey said the impact could be visible in companies with higher rural exposure.
“So, for example, M&M (Mahindra and Mahindra) could face challenges from a quarter-on-quarter growth perspective in their tractor segment.
Pandey also flagged potential softness for two-wheeler makers if rainfall remains below normal.
“But in general, I don’t think this is going to have a far bigger impact on the markets overall,” he said.
Midcaps, smallcaps continue to lead earnings growth
Sharing his broader market view, Pandey said benchmark earnings remained largely in line with expectations, while broader markets continued to outperform.
“So from our perspective, Nifty earnings for the quarter are somewhere about 5 per cent. And largely, in line with the expectation, the financial earnings were relatively better at seven per cent growth.”
“The highlight of this quarter has been the mid-cap and small-cap space. This is the third consecutive quarter of 20 per cent plus growth.” Adding that mid-caps posted nearly 20 per cent profit growth in Q4, while small-caps delivered around 24 per cent.
“Broader market earnings are fairly good in shape, and I’m not surprised that the midcap index has made a new high. I think smallcap will follow suit but Nifty is going to take some more time spending here.”
Paints top sector pick if crude oil prices decline
Among sectors, Pandey remains constructive on paints, especially if crude prices soften.
“If I have to really bet on something which will benefit from the decline in crude oil prices, I think paint will be the first category.”
“Paint as a category is far better placed in terms of protecting margins,” Pandey said. “I will not be surprised if some of these paint companies start to make new highs if crude oil tends to correct.”
He added that volume growth in the segment has steadily improved over the past few quarters, with the latest quarter seeing about 12.5 per cent growth.
Auto remains another preferred play
Beyond paints, Pandey sees value in the automobile pack, particularly if lower oil prices support demand and improve operating leverage.
“So I think auto and paint, according to me, are a bit better value picks to sort of look at if I have to factor in the, or if I have to look at the only variable as declining to full oil prices.”
He pointed to rural-focused names such as Mahindra & Mahindra, while noting near-term monsoon-linked demand risks remain.
IT recovery may take time
In the technology sector, Pandey said the medium-term outlook remains challenging despite AI-driven deal activity and acquisitions.
“So I think overall for the next two years our sense is that because of AI there could be a revenue deflation of 2-3 per cent which will continue to play out.”
“And I think AI-related revenue will start to sort of be more visible in numbers from FY 28, and beyond that is when probably things will start looking better for IT.”
“Up till now, for the next one year, they really don’t see much bigger,” he added.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
