That optimism was echoed by market expert, Sunil Subramaniam, who broadly agreed with the assessment that the coming quarters could mark a meaningful shift in market momentum.
“I do broadly agree with Sudip ji here and I do hold the same optimism and I would like to expand on what he said with two-three points. So, first is, the turnaround is already there.”
Subramaniam pointed to a striking reversal in sectoral performance. The weakest performers of the year — IT, realty and consumer durables — have begun to recover meaningfully in recent months.
“Now if you look at the fact that the worst performing sectors for the year were IT, realty, and consumer durable. Now if you take the same three sectors for the last three months, it has given double-digit returns, realty has turned positive, and consumer durables is about 1% negative.”
According to him, this shift has been underway since the October–December quarter, indicating that markets may already be in the early stages of a rotation rather than waiting for a distant trigger.
Another stabilising force, he said, has been the sheer scale of domestic institutional investor participation, which has helped cushion the impact of foreign selling.“DIIs bought about 8 lakh crores last year. FIIs sold only about net-net I think one-and-a-half lakh crores if you take off net of the primary market investments they made.”
The heavy selling by foreign investors, Subramaniam explained, pushed domestic investors towards large-cap names, particularly in banking and financial services, creating a sharp return divergence between large caps and the broader market.
“The fact that the FIIs have been selling has made them buy larger cap stocks and that is why you have seen the return differential between large and small.”
However, he believes this dynamic could reverse if foreign selling merely slows, even without aggressive buying.
“If FII selling comes down itself, you will find that DIIs will now go chasing growth.”
Earnings visibility, he argued, is also improving materially as multiple fiscal and monetary measures begin to play out together.
“All the efforts taken both on the fiscal and monetary policy, the income tax cuts, GST cuts, RBI rate cuts, liquidity infusion, CRR cuts, bank reforms, all of these will have a full year to play out and I do expect definitely that from an earnings perspective you will have a much better 2026.”
As earnings recover, mid- and small-cap segments could regain investor attention.
“As long as FIIs are not ruthlessly selling and giving them largecaps at a cheap price, DIIs will make the right choices from a three- to five-year.”
Looking at sectoral opportunities, Subramaniam highlighted consumer durables and real estate over the next year to eighteen months, while seeing a longer-term opportunity emerging in capital expenditure and manufacturing.
“So, consumer discretionary is the strongest from a year, year-and-a-half outlook.”
Over a longer horizon, he expects rising capacity utilisation and private investment to drive the next leg of growth.
“Private capex will be the new story for the next three to five years and that is also heavily mid and smallcap driven.”
Addressing the divergence seen in billionaire wealth rankings, Subramaniam said the explanation lies largely in public market exposure rather than any structural erosion of wealth.
“What is reported as the billionaire’s wealth is largely public market wealth.”
He pointed out that sectors such as IT and real estate underperformed, directly impacting promoters with large listed holdings, while those exposed to banking and financial services benefited from stronger market performance.
“The absence from the fastest growing segment of the market and their presence in what hurt the market is just the way this whole calculation has been done.”
On what could bring foreign investors back more decisively, Subramaniam outlined a few structural reforms he believes could act as long-term confidence boosters.
“I would like to see PSU bank mergers being put on top of the table because funding is a critical need and our PSU banks are not yet global sized.”
He also stressed the importance of deeper private-sector involvement in government-led capital expenditure and a broader, more effective rollout of production-linked incentives.
“The PLI has to become broad-based success if India has to become that manufacturing oriented country away from a services dependence.”
On the currency and the India–US trade deal, Subramaniam described the relationship between FII flows and the rupee as a “chicken and egg” situation.
“It is actually the FII pull out which has caused the currency to weaken.”
He noted that trade-related uncertainties have played a role in currency management decisions and that any positive development on this front could have a reinforcing effect.
“Any signs of positive sign around the trade deal happening will help the currency to recover and FIIs to come back.”
According to him, renewed foreign inflows would naturally strengthen the rupee, easing pressure on the central bank and reinforcing investor confidence.
“So, it will be a self-fulfilling prophecy because the moment FII comes back, dollar comes in itself the currency will strengthen.”
As markets look beyond a challenging year, the emerging narrative is no longer just about surviving volatility, but about positioning for a cyclical recovery — one increasingly driven by domestic growth engines, improving earnings visibility and a gradual return of global confidence.
