Outlook 2026: Nifty Poised For Upside? This Market Veteran Pegs Two Sectors As 'Opportunities Of The Year'

If the Indian stock market and the present levels of the headline indices are a reflection of the economy, then one will believe that the Indian economy is in fine form, according to Gautam Shah, founder and chief strategist of Goldilocks Global Research. The D-Street veteran believes that the near-term levels may not be as important than the overall market outlook.

In an exclusive interaction with NDTV Profit on Wednesday, Dec. 24, Shah said he eyes the equity indices heading for higher levels in 2026. The ace investor is bullish on the macro fundamentals and earnings outlook. Shah bets on metals and public sector undertakings (PSU) and has pegged the two sectors as the two major 'opportunities of the year' for 2026.

According to Shah, after going through so much negativity in the last six months on so many counts, the fact that the benchmark Nifty 50 index is at 26,200 itself is an indication that the market is still on a firm footing.

''Markets are headed for much high levels. The earnings results coming in January might just validate the government measures that came up in the last 6-8 months. If that happens, then I don't think the Indian stock market valuations are stretched," said Shah. World markets doing better than India is another concept altogether, according to the market veteran.

On a standalone basis, Nifty had a breakout a few days back. "Once we get past the levels of 26,250, from a near-term perspective, I'm looking at 26,700 as the target. Our medium-term target stays at 27,500," he said.

Shah believes the equity market is going to get more broad-based going forward, so the opportunity, which in the last one month, has been in the top 100 stocks is now going to be in the other 500-1,000 stocks.

This implies that the bigger trade might now be in midcaps and smallcaps in the near future. Coming to the existing pessimism among market participants, Shah agreed that portfolios have not done well, so the fear is prevalent. "On the other hand, when we look at India volatility index or VIX, it is trading in single digits. Historically, whenever this has happened, it has only triggered a rally for our markets," explained the D-Street veteran.

"So, there's a perfect foundation for the market moving to lifetime highs and beyond. We never have a market top or a major correction with VIX at such low levels. Eventually VIX will move higher and as earnings will follow in, markets will realise that all is well internally," he added.

Shah claims that seasoned investors have long believed in compounding in order to make money in markets. ''Value investors say compounding is something that stock markets can give you, but with what's already happened in the last five years, mass compounding is behind us,'' he said.

''I don't think we'll see many stocks compound from these levels because we are at levels of 26,000. There's a lot of disruption, India valuation is expensive and most markets in the world are doing better than India. At these levels, the question is about whether the economy is going to pick up and going to go at a very fast pace," said the founder of the brokerage.

According to the expert, the specific buckets which did well in 2025 will do well in 2026. "One has to work really hard to generate alpha and returns. Some buckets have done really well. Metals is our favorite. Non-ferrous stocks have done very well and banks have made a very good comeback."

Shah bets on the PSU space as the ''top opportunity for 2026''. ''I feel comfortable technically and fundamentally. Also, because it is under-owned and coming out of 18 months of consolidation, so the PSU sector will be the opportunity of the year,'' claimed the market veteran.

According to him, the IT sector made a good comeback in the last few weeks but this could be temporary and there are still lot of headwinds. ''The relative strength charts are not in a good space, so I don't see tech being a very big opportunity, given the valuations and given the way AI is disrupting India and the world in some sense,'' said Shah.

The expert also added that many of the big sectoral winners of the last two years such as infrastructure, defence, and railways have ''just lost the plot in some sense'' and people are still living in the past. ''The opportunity is in the newer sectors and that's where one needs to focus,'' he concluded.