Expert View on Indian Stock Market: Samvat 2082 Outlook Bright, Expect Healthy FII Inflows in 2026, Says Motilal AVP

The Indian stock market is expected to maintain a positive trajectory in Samvat 2082, with healthy Foreign Institutional Investor (FII) inflows anticipated in 2026, according to Nandish Shah, AVP – PCG Research and Advisory (Fundamental), Wealth Management, Motilal Oswal Financial Services.

Positive Outlook for Samvat 2082

Shah noted that the outlook for Indian equities in Samvat 2082 appears promising, driven by an impending earnings recovery, reasonable valuations, and resilient domestic flows. He anticipates FIIs to increase their investments in Indian markets as corporate earnings recovery gains traction from Q3FY26 onward, with growth broadening across sectors.

Earnings Growth and Valuations

Nifty earnings experienced a growth of approximately 5% in FY25 and are projected to rise by around 8% in FY26, potentially marking the bottom of the cycle. A sharper rebound is expected from FY27, with Nifty EPS projected to increase by nearly 16%, led by financials, autos, capital goods, and consumption. Valuations are also becoming more balanced, with Nifty's one-year forward P/E standing near 20.6 times, close to its long-term average. The trailing multiple has corrected to 23 times from 27 times a year ago. This normalization, coupled with a visible profit recovery, offers a stronger foundation for the next phase of market growth.

Key Triggers and Drivers

The key triggers for Samvat 2082 include a pickup in earnings momentum, revival in FII inflows, clarity on trade policy, and geopolitical stability. Domestically, policy continuity, robust capital expenditure (capex), and supportive monetary conditions will remain key drivers. The Reserve Bank of India's (RBI) upward revision of the FY26 gross domestic product (GDP) estimate signals strong confidence in India's domestic economic momentum, which has consistently exceeded expectations. This confidence boosts domestic sentiment and attracts inflows. With inflation below target, potential future rate cuts could further amplify positive market sentiment.

Q2 Earnings Expectations

Earnings growth in Q2FY26 is expected to remain moderate, with Nifty PAT projected to rise around 6% YoY and the MOFSL universe by about 9%. The broader tone of the season should remain steady but not spectacular, as a few heavyweights continue to drag aggregate performance.

FII Inflows Expected in 2026

Foreign investors are expected to turn structurally positive on India by late 2025 or early 2026, as global liquidity eases. India's valuation premiums remain high compared to most emerging markets, but its status as the fastest-growing major economy with political stability and solid earnings prospects makes it an attractive destination for investment.

Potential Challenges and Consolidation

While the overall outlook is positive, some analysts anticipate a period of consolidation in Indian equities. Nitin Bhasin, Head of Institutional Equities, Ambit Institutional Equities, suggests that markets may be entering a prolonged period of consolidation. He expects FY26 to be a year of earnings growth normalization, with the possibility of stagnation in large-caps and correction in mid- and small-caps. High-frequency data and weak consumer sentiment point to softening consumption, while muted private capex and slowing government revenues could constrain investment.

Sectors to Watch

Mahesh Patil, CIO at Aditya Birla Sun Life AMC, predicts Nifty earnings growth may accelerate to 12-13% over the next 12 months, driven by consumption recovery, monetary easing, and reduced foreign investor outflows. He sees improvement in IT, cement, and consumer sectors. Patil identifies autos, cement, consumer staples, and financials as sectors that may drive market performance. Analysts also suggest that microfinance, consumer discretionary, and public sector banks may emerge as key beneficiaries of this trend.

Investment Strategy

Prashant Jain, Founder and CIO of 3P Investment Managers, believes that the market's quiet phase is not a setback, but a setup for the next leg of growth. He advises investors to remain patient and stay invested, as India's real growth should stay around 6–7%, and nominal GDP growth near 10–11%. Jain expects the Nifty to compound at 11–12% annually.