‘2026 is about selective alpha, not broad beta’: Amisha Vora on markets and the union budget

As global markets contend with uneven growth, rising geopolitical tensions and shifting monetary regimes, India enters 2026 with a rare combination of economic momentum and structural resilience. According to Amisha Vora, Chairperson and Managing Director of PL Capital Group (Prabhudas Lilladher), Indian equities are well positioned to deliver relative outperformance even as global volatility persists, supported by a durable capex cycle, strengthening corporate fundamentals and the steady expansion of domestic capital.

However, with valuations already discounting a significant part of the growth narrative, Vora believes the coming year will reward selectivity over exuberance and discipline over momentum.

In an interaction with Fortune India, she outlines her expectations for markets, sectors poised to deliver alpha, the role of SIP flows in countering FPI volatility, and what investors should watch for from the Union Budget amid a focus on fiscal discipline and execution credibility. Edited excerpts:

Q: How do you see Indian equity markets shaping up in 2026 amid global volatility and uneven growth across regions?

Amisha Vora: In 2026, Indian equity markets are well positioned to deliver relative outperformance in an otherwise volatile and fragmented global environment. The backdrop is not very positive as the US is expected to face higher inflation & slowing growth due to the lagged impact of tariff-war, while China continues to deal with structural challenges in property and domestic demand, and Japan’s policy normalization may introduce volatility in global bond and currency markets. Among these uncertainties, India stands out as a rare combination of high growth, macro stability, and improving corporate fundamentals. The economy is likely to sustain 6.5–7.0% GDP growth, supported by a strong public and private capex cycle, manufacturing expansion under PLI and China+1, robust credit growth from a well-capitalised banking system, and stable inflation within the RBI’s comfort band. Corporate earnings should compound in the low-to-mid teens over the next two years, with growth leadership broadening beyond traditional consumption and IT into capital goods, infrastructure, PSU banks, defence, electronics manufacturing and renewables. Although market valuations remain at a premium to emerging market peers, they are structurally supported by higher ROE, superior earnings visibility, and a powerful domestic flow engine driven by SIPs, pensions and insurance savings, which has significantly reduced dependence on foreign flows and improved market resilience. Overall, 2026 is likely to be a year of selective, fundamentals-driven alpha rather than broad-based beta.

With domestic liquidity remaining strong, can SIP flows continue to offset FPI volatility this year?

Yes, the strength and persistence of domestic liquidity have structurally altered India’s market microstructure, allowing SIP flows to play a meaningful role in absorbing periods of FPI-led volatility in 2026. The steady expansion of household financial savings into mutual funds, retirement vehicles and insurance products has created a large, predictable and long-duration pool of capital that now anchors market depth and stability. This domestic bid provides an important counterbalance to the more cyclical and sentiment-driven nature of foreign portfolio flows, helping limit the intensity and duration of risk-off phases. While global shocks can still drive short-term corrections, the growing scale and maturity of domestic participation have significantly improved India’s ability to withstand external volatility and sustain market confidence through cycles.

Are current market valuations justified by earnings prospects, or is further consolidation needed?

Indian equity valuations are currently pricing in a high degree of optimism around growth durability, execution efficiency and competitive strength across a wide range of sectors, leaving limited margin for error. The market has already front-loaded a significant portion of the medium-term opportunity through a sustained period of price appreciation, resulting in valuation multiples that are well above long-term averages and offer little cushion against adverse surprises. In such an environment, further near-term upside is likely to be constrained unless there is a meaningful acceleration in profitability beyond what is already embedded in expectations. A period of consolidation — either through time or selective price correction — would therefore be a constructive development, allowing earnings to compound into current valuations and restoring a healthier risk-reward balance. Going forward, returns are likely to become more dispersed across sectors and companies, with capital gravitating towards businesses that demonstrate superior execution, pricing power, balance-sheet strength and the ability to sustain returns through the cycle, rather than benefiting from broad market multiple expansion.

Which sectors are best placed to deliver returns in a selective, fundamentals-driven market?

In a selective, fundamentals-driven market environment, sector leadership is likely to be shaped by earnings durability, balance-sheet strength and operating leverage rather than broad thematic positioning. Capital goods and engineering remain at the core of the domestic investment cycle, supported by multi-year order backlogs, strong execution pipelines and rising return on capital as utilisation levels improve. Manufacturing-linked sectors such as electronics, defence and specialty materials continue to benefit from supply-chain realignment and localisation, translating into sustained capacity expansion and improving margin profiles. The banking sector, particularly high-quality private lenders and structurally re-rated PSU banks, is entering a favourable phase of the credit cycle, with healthy loan growth, stable asset quality and expanding profitability driving earnings momentum. Metals are also better positioned in this cycle, supported by disciplined global supply, resilient demand from infrastructure and energy transition themes, and improving cost structures, which together enhance cash-flow generation.

How should investors balance risk and return in an environment of elevated uncertainty and moderate growth?

In an environment characterised by elevated uncertainty and moderate growth, investors need to move away from chasing momentum and instead focus on building resilient portfolios anchored in quality, diversification and discipline. The priority should be capital preservation first and compounding second — favouring businesses with strong balance sheets, predictable cash flows and proven execution over cyclically leveraged or sentiment-driven stories. Portfolio construction should emphasise diversification across sectors and styles, with an appropriate allocation to defensives and cash-generating franchises to cushion periods of volatility. At the same time, selectively owning structural growth leaders allows participation in upside without compromising on risk control. Above all, investors must remain valuation-aware, maintain adequate liquidity, and avoid overexposure to crowded trades, recognising that in uncertain markets, consistency of returns is far more valuable than maximising returns in any single year.

What are your key expectations from the upcoming Union Budget for equity markets?

From an equity market standpoint, the upcoming Union Budget is expected to reinforce policy stability, fiscal credibility and the medium-term growth agenda rather than deliver short-term populist measures. Investors will be closely focused on the scale, quality and composition of capital expenditure, particularly in infrastructure, railways, defence, power, urban development and logistics, as this remains central to sustaining the investment cycle and providing earnings visibility for industrials, capital goods and manufacturing. A firm commitment to the fiscal consolidation path will be equally important, as it helps anchor bond yields, contain macro risk premia and preserve India’s standing as a stable long-term investment destination. Incremental measures to enhance manufacturing competitiveness, support exports, encourage private sector capex and simplify regulatory compliance would be positive for corporate profitability, while any rationalisation of personal taxation that improves household disposable incomes would be supportive for consumption-led sectors. In addition, steps to deepen domestic capital markets and broaden participation of long-term savings into equities would further strengthen the structural liquidity base and reinforce confidence in India’s long-term equity market prospects.

Do you expect any major policy measures to support consumption and private investment?

A large, headline-grabbing policy intervention is unlikely, but the market will be looking for a set of well-calibrated measures that gradually strengthen demand conditions and improve the investment environment. On the consumption side, initiatives that support income generation and employment, particularly in rural and semi-urban areas, along with targeted measures for affordable housing and agriculture-linked sectors, would help stabilise spending momentum. For private investment, the focus is expected to be on improving execution and efficiency through faster project clearances, stronger public–private partnership frameworks, and more effective contract enforcement and dispute resolution. In addition, steps to expand the availability of long-term financing for infrastructure and manufacturing, including a greater role for development finance institutions and global capital, would further reinforce confidence in the private capex cycle. Overall, investors are looking for steady, credibility-enhancing reforms that strengthen the foundation for sustainable consumption and investment growth rather than short-term stimulus.

Which sectors are likely to benefit the most from Budget announcements—capex, infrastructure, manufacturing, or consumption?

The sectors most likely to benefit from Budget announcements are those closely aligned with the government’s long-term investment and growth priorities rather than short-term demand stimulus. Capital expenditure and infrastructure-linked segments typically emerge as the primary beneficiaries, as sustained allocations to roads, railways, defence, power, logistics and urban development translate directly into stronger order inflows and improved execution visibility for capital goods, engineering and construction companies. Manufacturing-oriented sectors are also well positioned to gain from continued policy support for localisation, export competitiveness and supply-chain diversification, particularly in areas such as electronics, defence production, renewable energy and specialty materials. While consumption may receive some incremental support through targeted welfare and employment-linked initiatives, the overall policy thrust is expected to remain investment-led, making capex, infrastructure and manufacturing the key sectoral beneficiaries from a Budget perspective.

How important will fiscal discipline be for market sentiment this year?

Fiscal discipline will be one of the most important determinants of market sentiment this year because it directly influences the macro risk framework within which equities are priced. In an environment of elevated global uncertainty, large fiscal slippages would quickly translate into higher bond yields, currency pressure and a rising cost of capital, all of which compress equity valuations and weaken earnings visibility. Conversely, adherence to the consolidation path enhances policy credibility, keeps sovereign risk premia contained and preserves the flexibility to respond to future shocks without destabilising financial markets. For investors, fiscal discipline is therefore not just a macro metric, but a signal of institutional maturity and policy predictability, which lowers the structural risk premium on Indian assets and supports long-term capital allocation into equities.

What risks should investors watch out for post-Budget?

In the aftermath of the Budget, investors should look beyond the headline announcements and focus on the quality, credibility and pace of implementation. The primary risk lies in execution—delays in project awards, slower-than-expected ground-level spending, or bottlenecks in approvals can dilute the intended growth impulse and impact earnings visibility for capex-linked sectors. Any deviation from the stated fiscal consolidation path, or overly optimistic assumptions on revenues and disinvestment, could push bond yields higher and tighten financial conditions, which would have negative implications for equity valuations. Markets will also be sensitive to policy fine print, particularly around taxation, subsidies and regulatory changes, which can materially alter sector profitability. Finally, with expectations often built up ahead of the event, a “sell-on-news” reaction remains a tactical risk, making short-term volatility a natural feature even after a well-constructed Budget.

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