Speaking to ET Now, Sinha said Indian market valuations, which were a major concern heading into 2025, have now moderated to around 10-year averages. “India is not cheap, but it is no longer expensive. That alone changes the risk-reward equation meaningfully,” she noted.
Multi-asset approach still relevant
While multi-asset strategies worked best in 2025 amid global volatility, Sinha believes equities could reclaim centre stage in 2026 as foreign investors reassess portfolio allocations. If stretched AI-linked valuations in global markets correct, India could emerge as a diversification hedge for global capital.
“The AI growth story remains intact, but the debate around valuations is intensifying. If that trade unwinds even partially, India offers a compelling alternative,” she said.
Sectors FIIs may favour
Sinha said financials remain a core long-term bet given their central role in India’s growth. The sector offers multiple stock-picking opportunities across banks, NBFCs, asset managers, brokers and fintechs, spanning both private and PSU names.
IT services, despite concerns around AI-led disruption, now offer more attractive valuations after underperformance. However, Sinha cautioned that gains will be selective. “Innovation will decide winners and losers; this will not be a sector-wide rally,” she said.
Real estate is another sector on her radar. Despite rising on-ground property prices and relatively benign interest rates, listed real estate stocks have lagged, creating a potential valuation opportunity.She also sees scope for a revival in capital goods, infrastructure and select small- and mid-cap stocks that have corrected sharply in 2025. “India still needs sustained capex. Valuations in parts of this space are beginning to look interesting again,” she said.
Bottom-up stock picking key
According to Sinha, 2026 is likely to reward bottom-up investing rather than broad sectoral bets. While mid- and small-caps could see a general recovery, the heavy pipeline of IPOs may cap headline market returns by absorbing liquidity.
On consumption, Sinha said the theme is best played through stock selection rather than broad exposure. Financials, real estate and autos offer indirect consumption plays, while competitive intensity means only companies gaining market share and margins will outperform.
She added that a gradual recovery in rural demand could support segments such as two-wheelers, though she refrained from naming specific stocks.
Overall, Sinha remains cautiously optimistic. “India’s macro fundamentals are stable, valuations are healthier, and several laggard sectors are offering value. Compared to 2025, 2026 should be a better year for Indian equities—especially on a relative basis,” she said.