India Outlook 2026

India’s macro outlook for 2026 remains broadly constructive, underpinned by its domestically driven growth model and policy continuity. GDP is forecast to expand by around 6.5% in fiscal 2026, matching the pace of fiscal 2025, according to analytics provider CRISIL. While this represents a moderation from earlier post-pandemic highs, it keeps India among the fastest-growing major economies globally. 

Household consumption continues to be a key growth engine, supported by rising incomes, favourable demographics and urbanisation trends. At the same time, public investment remains elevated, with infrastructure spending across transport, energy and digital networks reinforcing medium-term productivity gains. Monetary conditions are also expected to stay broadly accommodative, providing support to both consumption and private investment. 

“Comparing Indian economic growth performance with that of advanced economies shows that while past external shocks have caused short-term challenges, they have not derailed long-term growth,” says Dharmakirti Joshi, Chief Economist at CRISIL. “Importantly, India has enhanced its economic growth advantage over developed countries by pursuing reforms, infrastructure development and process improvements.” 

Structural growth themes are increasingly visible across key sectors. Bellevue Asset Management highlights the rapid expansion of India’s middle class alongside substantial government spending on healthcare infrastructure as important long-term drivers. Chronic disease management, expanding private hospital networks and the rise of specialty pharmaceuticals are contributing to the emergence of new healthcare ecosystems, positioning India not just as a manufacturing base but as an originator of high-quality therapies and platforms. 

Despite the positive backdrop, risks remain. External developments could test India’s resilience, particularly as global trade dynamics shift. “The significant change in the global trade landscape in fiscal 2026 will test India’s economic resilience, due to both direct and indirect effects of imposed tariffs,” cautions Joshi. However, market analysts broadly see India’s domestic fundamentals as a key buffer against external shocks. 

India Outlook: Equities

Indian equities faced a more challenging environment in 2025, marked by downward revisions to growth expectations, pockets of consumer softness and bouts of global risk aversion. After several years of valuation expansion, Indian equities saw pressure in 2025 as earnings expectations were revised down and multiples began to normalise, according to market commentary. Despite this, asset managers broadly agree that the long-term investment case for Indian equities remains intact. 

“We believe India’s equity market offers great upside potential as it benefits from a large and young population, and it remains the fastest-growing major global economy,” says Andrew Mathewson, Portfolio Manager at ClearBridge Investments. Structural drivers such as favourable demographics, rising formalisation of the economy and sustained capital expenditure continue to underpin earnings growth potential over the medium to long term. 

From a sector perspective, Mathewson highlights long-term opportunities in Indian banks, supported by healthier balance sheets and improving asset quality, as well as consumer discretionary stocks, which stand to benefit from rising incomes and urban consumption trends. He also points to IT services, where sentiment has been weighed down by concerns around artificial intelligence disrupting traditional outsourcing models but signs of stabilisation are emerging. 

Market structure has also evolved meaningfully. While foreign investor flows have remained volatile, domestic investors have increasingly become the backbone of India’s equity market. Growing participation via systematic investment plans (SIPs), insurance and retirement savings has helped cushion periods of global outflows and reduced India’s historical reliance on foreign capital. 

Long-term performance supports this perspective. “From the 1980s till now, Sensex has delivered 15% compounded return. So, volatility is temporary but growth is permanent,” notes Nilesh Shah, Managing Director of Kotak Mahindra Asset Management. 

India Outlook: Bonds

Asset managers broadly expect India’s bond market to offer a stable environment in 2026. Research by FTSE Russell highlights ongoing improvements in market accessibility and infrastructure, reinforcing India’s appeal to long-term investors, particularly in the context of global bond index inclusion. 

“Indian government bonds offer higher yields than the APAC peer group, despite very low inflation rates. Fiscal consolidation and the prospect of lower short rates give a favourable outlook for 2026,” says Robin Marshall, Director of Global Investment Research at FTSE Russell. In addition to relative yield appeal, FTSE points to improved liquidity, market depth and settlement frameworks, which have lowered barriers for international investors and supported more stable demand. 

From a strategic allocation perspective, Amundi argues that Indian bonds should be considered as part of long-term portfolio construction. “We believe that Indian assets — both equities and bonds — deserve consideration as potential long-term standalone allocations that offer structural growth and attractive diversification benefits to global portfolios,” says Monica Defend, Head of Amundi Investment Institute and Chief Strategist. 

Amundi highlights three key drivers underpinning the case for Indian bonds. First, growth potential, supported by resilient domestic demand and a credible macro policy framework. Second, diversification benefits, as Indian bonds have historically shown relatively low correlation with developed market fixed income, helping improve portfolio resilience. Third, a rising and increasingly diversified investor base, with domestic savings playing a growing role alongside gradual foreign participation, supporting market stability. 

According to Amundi’s analyses, adding Indian bonds to a global diversified allocation “could help to both raise expected returns and reduce overall portfolio volatility over the next decade”.