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Stocks to buy for long term: The Indian stock market has significantly lagged Asian peers in the last six months, hurt by the steep 50% tariffs on the US by India and deadlock in the trade deal between Washington and New Delhi.

A latest report by ICICI Direct said the performance gap underscores that trade policy clarity, not domestic growth alone, has been the dominant driver of regional equity returns. Against this backdrop, it believes that trade resolution is the missing catalyst.

The US-India deal could unlock India’s relative re-rating versus Asian peers, and is crucial for its re-rating to 29,200 in the next calendar year, the brokerage said in its Quant Yearly Outlook report for 2026.

It added that FPI outflows could reverse as US quantitative tightening ends and rate cuts begin. Improving liquidity and a weaker dollar may revive FPI inflows into India by late 2025 or early 2026. FPI flows have favoured AI-driven economies, leading to India’s underperformance over the past two years. However, stretched AI valuations could trigger a correction and sharp outflows, marking a potential inflection point.

"A 'fizzle' in AI enthusiasm would likely initiate a major rotation of capital globally; India is well-positioned for this reversal," ICICI Direct analyst Jay Thakkar opined. Sharing the 2026 outlook, the brokerage said that Nifty's risk-reward range is between 24,200 to 29,200 for the next year.

ICICI Direct also listed five stocks to buy for the long term. Bank of India, Marico, UltraTech Cement, TCS and Sun Pharma are its top five quant picks for 2026.

Bank of India stock has witnessed a gradual decline in open interest without any major delivery-based selling pressure. Hence, the recent declines can be attributed to profit booking after a stupendous move, and we believe current levels present a fresh entry opportunity.

The long-term mean for the stock is placed near the 120 level, and we believe the stock should trade with a positive bias as long as it holds above this level in the coming months, said the brokerage.

Banking index has relatively outperformed the headline index, with major outperformance seen from PSU banks, as the PSU Bank index has recorded nearly 25% gains during CY25 so far. "We expect this outperformance to continue in the coming months as well, and Bank of India appears to be among the outperformers in the pack," ICICI Direct opined.

FMCG as a sector saw mixed performance, and stock-specific moves were largely observed, said the brokerage, adding that among the pack, Marico provides a good risk-reward opportunity at current levels.

From the F&O front, Marico stock is among the few names that have not seen a buildup of short positions during the recent market weakness and has largely witnessed an addition of long positions. The stock has been consolidating in the range of 700–750 despite broad market weakness, and ICICI Direct expects it to continue its outperformance in the coming months.

Historically, the stock has shown a tendency to find a directional move after taking support near its mean + 1σ levels. The stock has been consolidating around these levels for the last few months, and we expect it to move higher towards 860 in the coming months, it opined.

Pharma stocks have relatively underperformed last year amid trade concerns and continued FIIs selling pressure. However, early signs of reversal are visible in the sector, and we expect sectoral heavyweight Sun Pharma could be the major gainer if FIIs flows start once again, said the brokerage.

"From the data front, the leverage in the stocks is one of the lowest we have seen since Covid, suggesting no major short build-up in the stock. Hence, in case of recovery, fresh longs should add the momentum on the higher side," it added.

Long-term mean for the stock is placed near 1700 levels, and it hasn’t spent much time below these levels post-COVID. ICICI Direct believes the stock should find strong buying interest around these levels and witness a strong reversal in the coming months.

Technology stocks have seen the highest FIIs selloff among sectors last year, as FPIs pulled out nearly ₹70k crore from the sector. As a result, sectoral heavyweights have been under selling pressure throughout 2025. With a reversal in FIIs flows, ICICI Direct believes stocks like TCS are likely to take the lead and move towards 3900 levels in the coming months.

From the data front, open interest in the stock is continuously increasing, suggesting ongoing short additions in the stock. It expects the stock to find momentum on the back of short covering.

"The stock has historically shown the tendency to find a sharp directional move once it surpasses its mean - 1σ levels. It has been hovering below these levels for the last one year, and we expect it to move towards its mean levels in the coming months," the brokerage added.

Infrastructure-related stocks, particularly cement stocks, have closed the year almost flat, relatively underperforming the Nifty. The selling pressure from FIIs was relatively lower compared to other sectors. The stock had witnessed a long built-up cycle prior to this fall, which was mainly on account of long unwinding, i.e., profit booking.

Ultratech Cement, being part of the Nifty and a sectoral heavyweight, is likely to outperform the rest of the peers, considering FIIs flows are likely to be seen. From the derivatives perspective, the stock is likely to witness the next round of long buildup as the profit booking seems to be over, said the brokerage.

Currently, the stock is offering an attractive risk-reward ratio as it has reversed from its long-term average. ICICI Direct expects fresh long additions in the stock along with delivery buying, which should help it move towards life highs in the coming months.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, 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.

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