Speaking to ET Now, Bandyopadhyay said relentless foreign institutional investor (FII) selling weighed heavily on markets in 2025, even as strong domestic inflows prevented a deeper correction.
2025: Range-bound and disappointing
“Returns have not been anything great. Smallcaps and midcaps were particularly disappointing, while largecaps delivered selective gains,” Bandyopadhyay said, noting that markets oscillated within a narrow range despite touching all-time highs.
However, he added that the much-discussed time correction has now played out, making valuations more reasonable compared to the start of 2025.
2026 outlook: Earnings revival key
Looking ahead, Bandyopadhyay is optimistic about 2026, citing improving corporate performance.
“Q3 results should be better than Q2, and Q4 could be even stronger. That should lend support to both earnings and valuation multiples,” he said.
He added that a sustained market rally would likely require the return of FIIs, but even without aggressive foreign inflows, Indian equities should “chug along in positive territory” next year.Assuming GDP growth of 7–8% and inflation in the 3–4% range, Bandyopadhyay expects nominal GDP growth of 11–12%, which could translate into 15%+ returns for well-constructed portfolios.
Stock picking to matter more than ever
Bandyopadhyay believes 2026 will be a market where alpha generation through stock selection becomes critical.
“Investors will need to carefully choose sectors and companies. It won’t be a broad-based rally,” he said.
Consumption sectors show green shoots
He sees early signs of demand revival in consumer durables, automobiles and FMCG, with December consumption data encouraging.
“Demand has been robust and January–March should also be strong, making Q4 a good quarter for consumption-led earnings revival,” he said.
Insurance: LIC top pick
On insurance, Bandyopadhyay said the removal of GST is likely to support demand, but valuations remain the deciding factor.
“Our number one pick in the insurance space is Life Insurance Corporation of India,” he said, citing LIC’s significant valuation gap compared with private peers and the massive opportunity from India’s low insurance penetration.
While acknowledging that LIC lags private insurers on some operational metrics, he believes the valuation comfort offers scope for incremental returns.
Health insurance offers long-term opportunity
Bandyopadhyay is also positive on the health insurance segment, where penetration remains low despite rising awareness.
“The opportunity is significant, though fraud and claims management remain challenges,” he said, adding that Star Health is a long-term bet worth tracking.
Bottom line
Summing up, Bandyopadhyay said 2026 could mark a shift from frustration to opportunity. “Valuations are better, earnings are improving and the macro backdrop remains supportive. A carefully curated portfolio can deliver healthy returns, but stock picking will be the key differentiator,” he said.