On the other side, in the fixed income markets, the 10-year G-Sec yield stands at 6.58%, down from 6.80% at the beginning of calendar year 2025. Despite concerns around the currency, which has depreciated from Rs. 85/USD in January 2025 to Rs. 90/USD today, negative surprises on tariffs, and conflicts at the border, both equity and fixed income markets have displayed remarkable resilience.
These moves are extremely significant, as they demonstrate the strength of the Indian economy, the robust growth of Indian businesses, and the growing maturity of Indian markets. Developments in 2025 make us increasingly optimistic about equity market gains in 2026. With inflation forecasts trending downward, including core inflation now projected below 4%, there is room for further easing of interest rates. This makes us comfortable on the fixed income side too.
Let me review the year from the perspective of where we stand across different cycles.
We began the year with the Government announcing tax benefits in the Budget and the RBI embarking on a path of interest rate cuts. These measures typically take a few months to reflect in growth. The Government followed up with GST rate cuts in September, further stimulating demand. As far as the economic cycle is concerned, we are now on a positive upturn.
- Business Cycle (Profit Cycle)
With the pick-up in domestic demand and improvement in economic growth, the corporate profit cycle has also turned upwards. We have already seen earnings upgrades for Nifty 50 companies in estimates for FY26 and FY27.
- Credit Cycle (Financial Cycle)
The RBI has left no stone unturned in stimulating the credit cycle. We have witnessed a decline in interest rates, cuts in the CRR for banks, and OMOs to facilitate liquidity in the system, ensuring a smooth transmission of rates.This is the one cycle yet to see a meaningful improvement. Investors continue to remain worried and anxious about the currency and the balance of payments situation. Uncertainty is being mistaken as risk which is dampening investor enthusiasm, muting the market’s response to otherwise positive returns this year. However, with a likely trade deal with the EU and the US, these concerns should gradually be put to rest.
As 2025 draws to a close, the markets have quietly delivered strong outcomes amid an environment of global uncertainty and investor scepticism. While sentiment remains cautious, fundamentals continue to strengthen. A synchronised upturn across the economic, business, and credit cycles, supported by proactive policy measures and easing inflation has laid a solid foundation for sustained growth. As history suggests, such periods of underappreciation often precede durable market advances.
We therefore enter 2026 with confidence in India’s structural strengths, resilience across asset classes, and the potential for improving investor sentiment as macro headwinds ease.
(The author is CIO, Bajaj Finserv Asset Management)