2026 markets may reward allocation shifts, not past winners: Report

Largecap equities may gain traction in 2026 as metal returns stabilise after a strong rally last year

With gold and silver sharply outperforming equities last year, investors may need to rethink their 2026 strategy rather than simply repeating past winning bets.

 

A new global outlook report by advisory firm 1 Finance says that while momentum trades dominated 2025, this year will be shaped by slower rate cuts, uneven global growth, and India’s gradual recovery — signalling a shift from broad rallies to selective asset allocation.

 

Precious metals dominated returns last year. Gold prices rose 72 per cent in rupee terms, supported by aggressive central bank buying and declining real interest rates. Silver surged even more sharply, gaining 122 per cent amid supply shortages and industrial demand from solar and electronics sectors.

 

 

The report expects returns from both metals to stabilise in 2026 as investment demand cools and profit-booking increases after a strong rally.

 

Equities told a different story: Indian markets underperformed several global peers in 2025, stifled by foreign investor outflows, rupee weakness, and subdued urban consumption.

 

The report said India’s economy is projected to grow at around 6.7 per cent in 2026, as inflation averages about 3.9 per cent. This could create room for 50–75 basis points of repo rate cuts during the year.

 

Lower borrowing costs and improving domestic demand may support equities, but gains are expected to be selective.

 

Largecap stocks appear better positioned due to stronger earnings visibility and potential foreign institutional investor re-entry.

 

Mid and smallcap stocks may benefit from rural recovery but remain more vulnerable to global volatility.

 

“The investors who do well this year will be the ones who understand which macro phase we’re in and position accordingly,” said Animesh Hardia, senior vice-president, quantitative research, 1 Finance, adding that India has moved from a slowdown phase towards recovery.

 

Global markets show divergence

 

The report highlights widening differences across global markets:

 

• US equities face pressure from expensive valuations and inflation risks.
• European markets carry fiscal uncertainties.
• The UK, China and Japan offer relatively better valuation comfort heading into 2026.

 

This divergence suggests that global diversification may matter more than headline index performance.

 

What should investors do in 2026:

 

The report lists three key themes for personal investors:

 

• Asset allocation may matter more than market timing
• Large-cap exposure could offer relative stability
• Precious metals may act as portfolio diversifiers rather than return drivers

 

2026 is unlikely to deliver uniform gains across asset classes. Instead, outcomes may depend on disciplined allocation aligned with changing macroeconomic conditions rather than chasing past performers.