Synopsis

The January 2026 India Investment Strategy reflects a shift from recovery anticipation to early-cycle consolidation, set against a global backdrop of moderate growth, easing inflation, and a late-stage monetary easing cycle. While global growth remains resilient—led by the US and supported by AI-led investment and lower energy prices—divergences across regions persist, with China’s policy-dependent trajectory and elevated global bond yields remaining key swing factors.

Domestically, India enters CY26 with improving macro visibility. Growth momentum is expected to extend into FY27, driven primarily by domestic demand, gradual capex broadening, benign inflation, and supportive monetary and regulatory conditions. The prolonged earnings downgrade cycle appears to have bottomed, setting the stage for a potential FY27 earnings upgrade cycle, though breadth remains narrow and valuations—especially in small caps—warrant caution.

Against this backdrop, the Investment Committee maintains a constructive but selective stance on Indian assets. The emphasis remains on quality businesses with earnings visibility, diversified portfolio construction, and themes aligned to domestic growth and capex recovery, while remaining mindful of global rate risks, heavy equity supply, and episodic foreign flows. The strategy favors stock selection and sector rotation over broad market exposure as markets transition into the next phase of the cycle.