Kotak Mutual Fund
Annual Outlook 2026: Structural Trends to Drive Earnings Growth
Kotak Mutual Fund
Annual Market Outlook 2026 predicts robust investment opportunities across
equities and fixed income amid easing rates and structural growth drivers
Mumbai / Chennai,
December 3, 2025: Kotak Mahindra Asset Management Company Ltd (“KMAMC”/ “Kotak Mutual
Fund”) today released its Market Outlook 2026, offering a comprehensive view of
the macroeconomic environment and key investment themes expected to shape
India’s financial markets in the coming year. The report underscores
opportunities across equities, fixed income, and thematic sectors, while
highlighting global and domestic trends that investors should watch closely.
Nilesh Shah, Managing
Director, Kotak Mahindra AMC, said, “Equity returns in FY2026 are likely to be
anchored in earnings growth, with India Inc expected to deliver double-digit
growth in FY27. This strength is likely to attract foreign portfolio investors,
supporting market liquidity. Midcaps are poised to outperform large and small
caps, though the margin of outperformance may remain narrow. Gold and silver
should continue to see upside, aided by sustained central bank buying.
Investors are advised to moderate return expectations and adopt a balanced,
diversified approach across asset classes to navigate evolving market
dynamics.”
Key Equity Investment
Themes for 2026
1. Financial Services
– Improving Growth and Profitability
Credit growth has
started to pick up, indicating improved lending activity. This uptick is
reflected in the rising Credit to Deposit Ratio. The healthy credit growth is
supported by strong fundamentals and improving capital adequacy. Return ratios
remain healthy making the sector attractive for long-term investors. The
narrowing gap between credit and deposit growth could ease margin pressures,
supporting profitability.
2. Consumption
Upcycle – Gaining Momentum
Consumption is set
for a strong rebound, aided by rising incomes, GST reforms, and festive demand.
Rural Income per capita has crossed the $2000 mark1, a key inflection point
that typically drives higher discretionary spending, benefiting sectors like
Autos. With India among the lowest penetrated markets for two-wheelers and passenger
vehicles globally, rising aspirations, GST tax relief, benign inflation, and
rural recovery would drive demand. Monthly sales trends already reflect this
momentum, signalling a structural shift toward higher consumption and
premiumisation.
3. E-commerce –
Digital Acceleration
India’s e-commerce
market offers significant growth potential, driven by low penetration and
increasing digital adoption. Overall penetration is expected to rise to
12–13%2 by FY30, with categories like electronics and beauty & personal
care leading the surge. The market remains highly consolidated, with the top
three players commanding nearly 80%3 share, creating a strong runway for scale
and profitability as organized retail and premiumisation trends accelerate.
4. Healthcare Opportunities
Healthcare spending
is rising with aging demographics and increasing chronic ailments. India has
one of the largest old age populations4 and the same is expected to double
over the next 25 years5. This structural shift would drive the growth in demand
for healthcare services.
The Fixed Income
Outlook:
With evolving market
conditions, fixed income is set to play a meaningful role in portfolios by
adding stability and helping manage risk. India’s prospects of entering the
Bloomberg Global Aggregate Index have also strengthened, with a formal decision
expected in January 2026 and potential inflows of around 25 billion dollars6.
Supportive macro fundamentals, along with balanced demand and supply dynamics,
continue to provide a constructive outlook for the bond market.
Read the full report here: https://www.kotakmf.com/documents/Annual-Outlook-2026
