In 2025, the BSE Midcap index has returned a modest 0.4 per cent till date, while Sensex has moved up 8.6 per cent, according to exchange data. BSE Smallcap index, on the other hand, has lost 6.6 per cent | Photo Credit: Kativ
Nilesh Shah, Managing Director, Kotak Mahindra AMC, said equity returns in this fiscal are likely to be anchored in earnings growth, with India Inc expected to deliver double-digit growth in FY27. This will attract foreign portfolio investors, supporting market liquidity.
Midcaps are poised to outperform large and small caps, though the margin of outperformance may remain narrow, he said.
Gold, silver
Gold and silver should continue to see upside, aided by sustained central bank-buying, and investors are advised to moderate return expectations, he added.
In 2025, the BSE Midcap index has returned a modest 0.4 per cent till date, while Sensex has moved up 8.6 per cent, according to exchange data. BSE Smallcap index, on the other hand, has lost 6.6 per cent.
Kotak MF has identified financial services sector, consumption, e-commerce and healthcare as the key investment themes for 2026.
On the sharp fall in rupee value against dollar, Shah said the destiny of the rupee is to depreciate further and the 90-per-dollar mark will be the new normal for the Indian currency.
High inflation
Rupee will continue to depreciate because India’s inflation is higher than the trading partners, and domestic productivity is lower than that of its trade partners, he said.
A depreciation of 2-3 per cent in the rupee is quite natural given the imbalances, he added.
While FPI flows can vary in the short term and influence the currency levels, he said there is no room for the rupee to appreciate on a permanent basis.
According to the fund house, the financial services sector is expected to perform because of improving credit growth and profitability.
Consumption is set for a strong rebound, aided by rising incomes, GST reforms and festival demand. Rural income per capita has crossed the $2,000 mark, a key inflection point that typically drives higher discretionary spending, benefiting sectors such as autos.
Overall e-commerce penetration is expected to rise to 12–13 per cent by FY30, with categories such as electronics and beauty and personal care leading the surge. The e-commerce market remains highly consolidated, with the top three players commanding nearly 80 per cent share.
Healthcare spending is rising with aging demographics and increasing chronic ailments. India has one of the largest old age population, and the same is expected to double over the next 25 years.
On the fixed income space, the fund house believes India’s prospects of entering the Bloomberg Global Aggregate Index have also strengthened, with a formal decision expected in January and potential inflows of about $25 billion.
Published on December 3, 2025
