Investment Ideas Note February 2026

Investment Ideas Note February 2026 – Wallet Wealth

S.Sridharan, Founder, https://www.walletwealth.co.in/

The Benchmark Index BSE hit record highs early in 2026 January amid optimism around earnings recovery. Soon after, benchmarks fell for five consecutive sessions, marking the worst weekly drop in over three months. Later, markets recovered on positive trade-deal sentiment and strength in IT and metals. January was characterized by sharp swings rather than a clear directional trend.

Benchmark Index

Index	1st Jan 2026	31st Jan 2026	Change
BSE SENSEX	85189	82270	-3.43%
BSE MIDCAP	47082	45182	-4.04%
BSE SMALL CAP	51515	48284	-6.27%

The Sensex has fallen by 3.43% and the midcap index has fallen by 4.04% and the small cap index fallen by 6.27% during January shows a poor start of the year.

Monthly Returns (%):

Index	January 2026 returns
NIFTY 50	-3.15%
NIFTY MIDCAP 150	-3.93%
NIFTY Bank	-0.17%

Nifty 50, Nifty Midcap has fallen more than 3% but Nifty Bank has hold its value despite the volatility.

FII & DII Flows – Jan. 2026

Category	Equity (Cr)	Debt (Cr)	Net Flow
FII	-29487.33	-7260.27	-36747.6
Mutual Funds (DII)	42354.85	-90806.91	-48452.06

Both FII’s and DII’s were negative flow due to geo-political tensions and trade war uncertainty in the month of Jan-2026 makes the market most volatile during Jan-2026.

Macro-Economic Dashboard – India (as of January 2026)

Indicator	Latest Reading	Trend / Insight
RBI Projection GDP Growth FY26	~7.3%	Strong performance in services sector and a revival in manufacturing activity
CPI Inflation – Jan'26	~1.33%	Despite increase from Nov'25 still under RBI tolerance limit of 2%
Core Inflation – Dec 25	~3.2%	Core inflation is expected to be range bound
Repo Rate – Dec'25	5.25%	RBI had already cut repo rates to 5.25%
PMI Manufacturing – Jan 26	~55.4	Manufacturing Growth bounces back after December dip
PMI Services Jan'26	~58.5	Strong demand lifts services PMI in January
GST Collections (Jan'26)	~₹1.93 lakh cr	Strong compliance & robust tax base
Forex Reserves	~710 bn	RBI conducted forex swaps to infuse rupee liquidity into domestic markets

Highlights of Budget

· Economic growth focus: The budget emphasises sustaining India’s strong growth trajectory with GDP projected around 7.4 % supported by robust consumption and investment.

· Capital expenditure: A notable increase in infrastructure spending, with capital outlay raised to around ₹12.2 lakh crore, to boost roads, railways and key projects.

· Manufacturing & technology: Measures to strengthen domestic manufacturing, including semiconductor initiatives and rare-earth corridors, along with support for MSMEs and green technologies.

· Fiscal management: The fiscal deficit target was set around 4.3 % of GDP, reflecting continued focus on fiscal discipline.

· Employment & inclusivity: New frameworks and funds aim to support jobs, small businesses and balanced regional growth.

✅ Overall, the Budget 2026-27 balances growth-oriented public investment, fiscal prudence, and sector-specific reforms to support India’s economic transformation.

What is Positive?

A major positive for February is the return of Foreign Institutional Investors (FIIs) as net buyers. After a heavy selling streak in January, FIIs turned net buyers. The U.S. has slashed the effective tariff on most Indian goods from 50% down to 18%. This was considered as a very positive move for Indian exports sectors like Textiles, Leather, Pharma, Auto Components & Tech & AI.

In February 2026, mutual fund managers have shifted from "budget anxiety" to a "structural growth" narrative. Despite the volatility of the Sunday Budget session (2026 Feb 1), several tailwinds are being highlighted as entry opportunities for disciplined investors.

The hike in Securities Transaction Tax (STT) on F&O (Futures raised to 0.05%; Options to 0.15%) is being hailed by AMCs as a structural positive for retail investors. Fund managers believe this will discourage high-risk day trading and redirect retail liquidity into SIPs and Diversified Equity Funds

RBI Monetary Policy

The Monetary Policy Committee (MPC) voted unanimously to keep the benchmark rates unchanged:

Repo Rate: 5.25%
Standing Deposit Facility (SDF): 5.00%
Marginal Standing Facility (MSF) & Bank Rate: 5.50%
Policy Stance: Neutral (Maintained by a 5:1 majority).

Outlook on Gold & Silver

The first four week of January 2026 saw a parabolic rally driven by Geo political tensions, central bank accumulation, and a weakening dollar. However, the month ended with a historic ‘realty check’

Hit an all-time record of $5,595 per ounce (International) and nearly ₹1.93 lakh per 10 grams (MCX) on January 29. On January 30–31, gold plunged over 12% in a single day, the worst rout since 2013, following the nomination of inflation-hawk Kevin Warsh as the next Fed Chair.

Silver surged an incredible 70% in one month, briefly touching $121.65 per ounce and crossing the ₹4 lakh per kg mark on MCX. Silver witnessed a 31.4% single-day collapse on January 31—its worst session since 1980—triggered by margin hikes and massive profit-booking.

Commodities are cyclical by nature. Periods of strong performance are often followed by sharp corrections, and vice versa. Attempting to time these cycles frequently lead to suboptimal outcomes.

Investment Strategy – Our View

Equity Allocation View

Market‑cap‑to‑GDP 116% → avoid lumpsum, stagger over 20–24 weeks

Interpretation: Markets remain modestly over valued but justified by earnings strength, formalization, and financialization of savings. Valuations require disciplined & staggered deployment.

Preferred themes:

Large‑cap & Hybrid funds for stability
Banking & Financial & Defence → tactical exposure

Avoid fresh small‑cap allocation unless 7+ year horizon

Debt Market – Dec 2025

G-Sec: 10Y benchmark around 6.71% and a 5 Y benchmark around 6.52%
Context: RBI liquidity operations earlier in the year and stable policy stance keep duration risk manageable; FPI bid in debt has stayed supportive.

Debt Allocation View

<1 Year: Money Market / Ultra‑Short Funds
~3 Years: high‑quality corporate bonds
Avoid Credit Risk segment due to volatility

Gold Outlook

Long-term portfolio: Maintain a core allocation (10%) in gold — as a hedge, store of value, and portfolio diversification tool (especially in uncertain macro environment).

Accumulate on dips / corrections: Given volatility and potential short-term pullbacks, using cost-averaging/SIP-like purchases may smooth entry & mitigate timing risk.

Short-to-medium term tactical calls: Near-term rallies may be exploited if global cues remain uncertain — but avoid over-exposure to gold-only bets (balance with debt/equities).

Combine with other assets: Use gold as a stabilizer in a diversified portfolio — pairing with equities, fixed income, or balanced funds to manage overall risk-return.

For more details and Investing