News

Expert view on markets: Shahzad Madon, MD and CEO of TCG Asset Management Company (AMC), believes that while it is difficult to predict the Indian rupee's movement in the short term, the domestic currency may remain on a weakening trajectory over the medium to long term. For the Indian stock market, he believes it is well-positioned and could potentially deliver returns in the low to mid-teens in 2026, supported by improving earnings and a constructive macro backdrop. In an interview with Mint, Madon shared his views on the stock market outlook, the rupee's movement, and the interest rate trajectory of the Reserve Bank of India and the US Federal Reserve. Here are edited excerpts of the interview:

Over the past three decades, the rupee has depreciated gradually against the dollar, with periods of steep declines particularly after economic crises, global financial events, or external pressure like oil prices.

The widened current account deficit of India is contributing to a weaker bias for the rupee amid global dollar strength.

In the short term, it’s very difficult to predict which way the rupee will move, but over the medium to long term, the currency is likely to remain on a weakening trajectory.

Looking ahead to 2026, we remain constructive on the market, as we appear to be entering an earnings upgrade cycle, with upcoming data likely to reinforce this emerging trend.

From their peak, valuations have moderated, but markets are neither expensive nor undervalued. On a broader basis, the market is well-positioned and could potentially deliver returns in the low to mid-teens in 2026, supported by improving earnings and a constructive macro backdrop.

However, the real opportunity lies in pockets of the broad market where stocks are trading at reasonable valuations and can deliver outsize earnings growth.

Since late 2024 broader market has significantly underperformed the Nifty 50 by nearly 10%. This increases the relative attractiveness of the wider market.

Backed by supportive monetary and fiscal policy, we expect a broad-based earnings revival in India in the next few quarters. Given the above Nifty 500 may reverse the trend of underperformance in the coming year.

We strongly believe that the earnings downgrade cycle in India is likely over. We are moving from the earnings downgrade phase to the earnings upgrade phase.

Looking ahead, robust agricultural output, subdued inflation, solid corporate and financial sector balance sheets, favourable monetary conditions and continued reforms are expected to further boost the earnings growth trajectory.

On the external front, service exports are likely to remain strong, but merchandise exports face some headwinds.

From Feb-25 to Dec-25, the RBI has reduced the repo rate cumulatively by 125 basis points by bringing the repo rate from 6.50% to 5.25%.

India’s retail inflation has eased to multi-year lows, with CPI falling below 2% in 2025, well under the RBI’s target range.

This low-inflation environment gives the RBI flexibility to lower interest rates, encourage growth and boost business and consumer activity.

While monetary policy will continue to remain supportive of growth, the RBI’s future rate decisions will remain influenced by developments in the global monetary environment.

Considering the current trends in US and Japanese yields, along with the recent depreciation of the rupee, the bulk of rate cuts may be behind us.

The Fed has cut interest rates for a third time this year, bringing the rate in the range of 3.5% to 3.75%.

As per the last data available, the unemployment rate and inflation are rising against the backdrop of new tariffs.

Fed chair also acknowledges that the peak impact of tariffs on consumer prices will be in the first quarter of next year. Current outlook is neutral to slightly hawkish, with the Fed projecting only one rate cut each in 2026 and 2027.

This rate cut is likely to enhance capital flows into emerging markets, particularly India, by improving the relative attractiveness of these economies for foreign institutional investors. This, in turn, may support the Indian rupee.

The Fed’s move also provides the RBI with additional room to ease monetary policy further, enabling it to support domestic growth while maintaining a neutral stance.

Read all market-related news here

stories by Nishant Kumar

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.

Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

Download the Mint app and read premium stories

Log in to our website to save your bookmarks. It'll just take a moment.

Oops! Looks like you have exceeded the limit to bookmark the image. Remove some to bookmark this image.