InCred Wealth's 2026 game plan: Staggered bets on equities, metals

In an email interview, Yogesh Kalwani says he prefers a mix of largecaps and select mid- and smallcap names, with sector tilts towards BFSI and healthcare

We see equity markets delivering 12–15 per cent returns in CY2026, supported by gross domestic product (GDP) recovery, lower interest rates and more reasonable valuations, said YOGESH KALWANI, head – investments, InCred Wealth. In an email interview with Sirali Gupta, Kalwani says he prefers a mix of largecaps and select mid- and smallcap names, with sector tilts towards BFSI and healthcare, and continues to back high-yield and accrual strategies on the fixed income side. Edited excerpts: 

Given current valuations, do you think investors should moderate their return expectations for the next 2–3 years?

Valuations have moderated to historical averages of 20x after last year's highs. Earnings recovery is anticipated in 2-3 quarters, driven by goods and services tax (GST)-led consumption and lower interest rates boosting credit. However, sustained 13-14 per cent earnings growth hinges on nominal gross domestic product (GDP) returning to 11-12 per cent, as current sub-9 per cent nominal GDP reflects subdued earnings. Until then, market returns may remain in the low double digits. Investors should consider a slightly longer-term portfolio view for deployments over the next 2-3 months.

 

How do you see the risk–reward across large-caps, mid-caps, and small-caps as we enter 2026?

LargeCaps are trading around fair value, while mid-and-smallcaps still command about a 20 per cent premium to their long-period averages. However, on a price/earnings-to-growth (PEG) basis, given that the earnings growth in broader markets is still clocking a healthy 20 per cent, these segments of the market don’t seem as unattractive as they were about 15 months ago. Year-to-date (Y-T-D) in CY25, these segments have underperformed the Nifty. With monetary policy easing, an expected earnings recovery, and positive news around the US tariff deal, there are selective opportunities in the mid-and-smallcap space as well.

What are your expectations from the Reserve Bank of India (RBI) in the upcoming policy decision and in 2026?

Given robust Q2 FY26 GDP and recent inflation at 0.3 per cent, we expect the RBI to maintain the status quo in its upcoming policy. Previous aggressive cash reserve ratio (CRR) and repo rate cuts are still finding their effect play out in the economy at large, and the RBI likely awaits further rate transmission. Global developments also influence decisions. Currently, the spread between India's 10-year and UST 10-year is well below its long-period averages, and a reduction in repo rate could reduce this spread, which doesn’t look supportive of the Indian Rupee. With tepid capital market flows, the RBI might not want to make rates less attractive from a foreign investor standpoint.

Which would you choose, India or diversified emerging markets (EMs) allocation for 2026–27?

We don’t see this as India versus emerging markets (EMs). For Indian investors, India will remain the core for the majority allocation, but a tactical 15–20 per cent allocation to global equities is a sound diversification strategy. Within global markets, select EMs such as Greater China still offer relative value. There are also private-market opportunities abroad in themes like artificial intelligence (AI), machine learning and robotics. We remain cautious on the sharp rally in the US “Big 7” tech names that have propped up the S&P 500.

What is your portfolio strategy for 2026?

In our 2026 market strategy, we continue to favour high-yield and accrual strategies in fixed income. We expect equities to do well on the back of GDP recovery, lower interest rates, more reasonable valuations and improving corporate earnings, and see equity markets delivering 12–15 per cent returns in CY2026. We prefer sectors such as BFSI, healthcare, and select mid-and smallcap names.

How should long-term investors deploy fresh capital: lump-sum vs staggered, and in which segments and why?

We advocate staggered investments to avoid single-point risk, except during black swan events like Covid-19 that offer compelling lump-sum opportunities. We recommend a 1-3 month staggered approach for large caps and a 3-4 month staggered approach for mid-and-smallcaps.

What is your outlook for precious metals like gold and silver over the next 12–24 months?

While low rates and a weaker USD typically support gold, its recent 24-month rally suggests a near-term breather and capped upside; gold will primarily serve as a portfolio hedge against USD debasement. Silver has broken out to new highs, driven partly by supply shortages, but may consolidate as these disruptions resolve. Investors should consider buying the dip or a staggered investment over 3 to 6 months.