Markets in 2026: Avendus Wealth's Saurabh Rungta decodes an ideal portfolio

Corporate earnings growth is expected to sustain in the mid-teens for FY27. If markets follow earnings growth trajectory, we see Nifty around 28,500-30,000 by end-2026, Rungta said

With a challenging calendar year 2025 drawing to a close, Saurabh Rungta, Chief Investment Officer at Avendus Wealth Management, tells Nikita Vashisht in an email interview that markets are looking forward to a "growth oriented" Union Budget 2026, a favourable US-India trade deal, and sustenance in earnings growth for upside catalysts. He breaksdown opportunities, risks, and an ideal portfolio construct for investors for 2026. Edited excerpts:

What's your take on the Reserve Bank of India’s latest monetary policy decision?

 

The RBI has continued with its calibrated stance, prioritising financial stability and durable inflation control. Rate cut, coupled with open market operation (OMO) and USD swap, will help the lending rates go lower and improve credit growth, especially for NBFCs.

 

 

For the markets, this decision keeps the macro backdrop constructive: benign inflation trends, strong domestic demand, and healthy banking system. The monetary policy has reduced downside economic risks and allows fundamentals to take the lead.

Where do you see the Sensex and Nifty ending CY-2026?

 

Over the past 12 months, Indian equities have under-performed global and emerging-market peers due to elevated valuations, softer foreign flows, and the absence of clear near-term catalysts. The MSCI India delivered 2.2 per cent returns in the last one year versus MSCI EM’s 28 per cent gain.

 

Looking forward, corporate earnings growth is expected to sustain in the mid-teens for FY27, supported by domestic consumption, financials, manufacturing, and capex. If markets follow earnings growth trajectory, we see Nifty around 28,500–30,000 by end-2026.

 

In addition, if we get positive structural triggers -- such as a favourable trade agreement with the US, reform-focused budget measures, and a return of strong FII flows – market valuations could re-rate.  ALSO READ | Nifty could outrun S&P in 2026, mirror earnings growth: Amish Shah, BofA

What are the risks and opportunities for investors as they enter 2026?

 

Among opportunities, a reform-oriented Budget that builds confidence on long-term manufacturing and investment flows would be a clear positive. In addition, India is not as expensive versus global peers as it was earlier, making risk-reward more favourable. If the US Fed rate-cut cycle continues, global risk assets could see another leg up, and emerging markets, including India, may benefit.

 

Similarly, a favourable US-India trade deal announcement -- currently not priced in -- could trigger a strong resurgence in foreign interest. Also, any pick up in private-sector capex would be a meaningful incremental driver.

 

On the risks front, global uncertainty remains a key overhang. AI has become a crowded investment theme globally, and if this enthusiasm unwinds or a bubble resets, global risk appetite could be hit. 

India has not directly participated in the AI upside so far, but a global correction can still affect flows and sentiment in the short term. Slower global growth, geopolitics, and commodity shocks remain additional variables to watch. Lastly if the earnings growth seen in Q2 does not sustain in forthcoming quarters, then the markets will start appearing expensive.

 

We believe domestic opportunities carry more weight. The key for investors in 2026 will be to stay selective -- focusing on businesses with earnings visibility and governance strength rather than chasing momentum.  ALSO READ | DBS flags 3 top risks to global markets in 2026; US tech correction looms

Where do you see the next pocket of growth in Indian equities – large/mid/smallcap?

Large-caps now offer a better risk-adjusted entry point versus broader markets, where valuations have moved ahead of earnings delivery. Within this, we continue to like domestic cyclicals — financials (excluding private bank). At the same time, there are a few contra opportunities worth keeping on the radar: IT services (tactical) and Pharma & healthcare.

 

On the other hand, in industrials, capital goods, power and utilities, share prices have already priced in quite a bit of optimism. Any disappointment in earnings or order execution could trigger a correction, post which these could again look attractive.

 

The same applies to the mid- and small-cap segments. The underlying themes remain strong, but valuations need to cool off and some more consolidation would be healthy before fresh leadership emerges from these spaces.

If you were asked to make an India-only equity portfolio today, with a 3-5-year horizon, what would it look like?

 

For a 3–5-year horizon, I would build a growth-oriented portfolio with a balanced allocation — roughly 50 per cent large-caps and 50 per cent selectively chosen mid- and small-caps. The idea is to capture India’s structural themes through market leaders, while using bottom-up mid/small allocations to enhance alpha, but without chasing momentum. The portfolio would be style-disciplined, focused on earnings visibility and capital efficiency and not merely momentum.  ALSO READ | Bulls can take Nifty 24% higher to 32,032 levels by Dec 2026: Kotak Sec

If this portfolio had to take global exposure, where would India stand? Which other countries would you bet on?

 

India would remain the anchor allocation in a global portfolio, given its structural earnings momentum, policy stability and depth of domestic demand. Outside India, we would look at a few complementary exposures:

 

• United States: innovation, AI ecosystems and premium global businesses — a natural core allocation for long-term growth and diversification. Current excesses to be avoided though. 
• Selective Asia-ex-China manufacturing hubs: beneficiaries of supply-chain diversification and global outsourcing trends. 
• Pharma / healthcare leaders globally: as a resilient, non-correlated component of the portfolio. 
• In addition, tactically, there would be a case for modest exposure to China purely from a mean reversion perspective. China has been meaningfully cheaper on a relative basis for quite some time, and any improvement in domestic policy sentiment or geopolitical backdrop could unlock a bounce.

ALSO READ | '2026 offers a strong case for foreign investor sentiment revival' 

Will we see FIIs making a structural comeback in India in 2026?

 

Global capital, today, is far more selective, smart, and hot in nature; it moves quickly to wherever risk-reward looks most compelling. For FIIs to make a structural return to India, we will need clear, confidence-building triggers, such as favourable US–India trade agreement; reform-oriented Budget that reinforces India’s long-term investment cycle; smooth Fed rate-cut trajectory that keeps global risk appetite strong; Sustained strong earnings growth from corporate India; etc.

 

That said, while there have been continuous FII outflows from the secondary market in five out of nine months of this financial year (including December to-date), FIIs have been net buyers in the primary market in every month this FY -- with December being the only exception due to large IPOs shifting to the latter half of the month. This indicates that global investors remain interested in India’s long-term story or are happy to remain tactical to benefit from immediate upside.

What should be an ideal portfolio construct for 2026 i.e. what should be the wealth allocation between equity, debt/fixed income, commodities (precious metals) for a high risk and risk averse investor for 2026?

 

Presuming a 3-5 year horizon and return expectation of ~10 per cent/~15 per cent for risk averse / high risk investor profile:

 

a.      Equities: 25 per cent/40 per cent

 

b.     Fixed Income: 30 per cent/5 per cent

 

c.      Alternate Debt: 30 per cent/ 20 per cent

 

d.     Alternate Equity: 0 per cent/20 per cent

 

e.      Commodity: 15 per cent/15 per cent