Sensex eyes 93,918 by end-2026; domestic flows to tame global volatility

Indian equity benchmarks are expected to see measured upside in 2026, with the Sensex seen touching 93,918 by December, supported by strong domestic liquidity even as global markets remain volatile and fragmented, according to a latest report by Client Associates (CA), India's leading multi-family office.

As per the report, the portfolio outcomes in 2026 will be driven more by asset allocation and resilience-focused strategies rather than market timing or broad-based rallies. Elevated global uncertainty, uneven growth across regions and valuation pressures are likely to cap sharp upside, prompting a calibrated approach to equity exposure.

“Equity markets in 2026 are likely to be driven less by broad-based rallies and more by selective opportunities anchored in fundamentals,” said Nitin Agarwal, Head of Investment Research at Client Associates.

“India’s domestic macro strength and improving earnings outlook remain supportive, but elevated valuations and global uncertainties call for a disciplined approach. Asset allocation, not market timing, will be key to balancing growth participation with risk management.”

The Sensex and Nifty 50 touched all-time highs of 86,159 and 26,326, respectively, on December 1, 2025. For the full year, the Sensex gained over 9%, adding 7,082 points from its December 31, 2024 close of 78,139 to end 2025 at 85,221. In a similar trend, the Nifty50 rose 10.5%, or 2,485 points, from 23,645 to 26,130 over the same period.

Indian equities lagged global peers in 2025

The report highlighted that Indian equities lagged global peers through much of 2025 amid high valuations and moderation in earnings growth, before stabilising later in the year. Looking ahead, global GDP growth is expected to soften marginally in 2026, with geopolitical developments and trade tensions continuing to influence market sentiment.

As per the report, market performance diverged across regions, with South Korea and Brazil emerging as top performers supported by sector-specific tailwinds, capital flows, and expectations of monetary easing. Chinese markets delivered strong returns on the back of policy support, while US equities remained resilient despite heightened volatility driven by trade and tariff-related uncertainty.

“From a global macro perspective, the assessment highlights a gradual moderation in global growth, with world GDP expected to soften marginally in 2026. Recent geopolitical developments, including renewed discussions around US engagement with Venezuela, have brought attention back to global energy supply dynamics,” CA said in its report.

Economic outlook remains constructive

On the domestic front, the outlook for India remains constructive. FY26 GDP growth has been revised upwards to 6.8%, supported by resilient domestic demand, policy initiatives and improving corporate earnings visibility. High-frequency indicators such as manufacturing and services PMIs remain in expansionary territory, while GST collections signal underlying economic strength.

Recent GST changes and supportive reforms have improved disposable incomes, boosting spending across automobiles, insurance and financial products. Client Associates expects consumption-led sectors to benefit over the medium term as policy support continues.

Valuations call for caution

While long-term growth prospects for Indian equities remain intact, elevated valuations and near-term moderation in earnings growth warrant caution. Earnings growth for Sensex companies is expected to remain subdued in the near term before recovering as macro conditions improve and monetary policy turns more accommodative, the report noted.

Based on its multi-factor framework, the firm expects Indian equities to be supported by strong domestic fundamentals, proactive policy measures and an eventual recovery in earnings through 2026. However, global uncertainties are likely to cap near-term upside, resulting in a measured rise in markets.

As per the report, liquidity conditions are expected to remain supportive, with domestic institutional investors and strong SIP inflows playing a stabilising role. These domestic flows are seen offsetting periods of foreign portfolio investor volatility, improving market depth and reducing sharp swings during global risk-off phases.

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