December Pulse - Sage Views - Market Outlook 2026

When the Going Gets Tough, the Tough Get Going - Billy Ocean

Dear Investor,

As we enter 2026, here is a throwback of how markets performed in 2025 and the themes that will define 2026. It was a tough year for investors as markets were unpredictable, and the harder one tried to predict markets, it just didn’t work out for most people I know. There was, however, one theme that was at the centre of everything, and while it might not have given you the best return, it sure beat all benchmarks.

Let’s start with how markets performed in 2025:

Korea was the best-performing market, followed by South Africa and Brazil, while India and Australia were the only markets with single-digit returns. On the asset class front, Gold and Silver had their best year, with both metals shining their best since the 1980s. To give you a context, gold and silver have had major corrections followed by periods of lull whenever we have seen such a high return year. For instance, investors who invested in silver during the peaks of 2011 have started making some profits only recently; similarly, investors who invested in gold during the peaks of 2012 did not make any returns for the next 8 years. This should be taken as a reminder that no asset class performs forever and giving into the euphoria might have a price.

FIIs have sold ruthlessly this year; the only difference this time was that it was supported by DII flows. However, there was a lot of sector rotation that took place, and most of the flows went to very few stocks. Markets are transitioning from a liquidity-supported phase to an earnings-driven phase. Valuations remain stretched in pockets, especially within mid- and small-caps, raising selectivity risk. Sustained market upside will require broader earnings delivery, not just flow support.

Markets at the index level might have looked like they did well, but investor portfolios have underperformed this year. Stock selection has been crucial; however, selecting a stock out of such a narrow basket is difficult for the best of fund managers. What we understand is that it was a year of passives, and it was a year for investors to accumulate.

Let’s talk about the year ahead - 2026:

While we see 2026 to be a decent year for equities, as there should be earnings revival with FII flows coming back to select sectors, it will definitely not be as good as 2023-24, we have been reiterating throughout the year to moderate your return expectations, we believe the same will be the case in 2026 but one can expect double digit returns from equities and a broader participation from the market unlike what we saw in 2025. Portfolios should remain anchored in large-caps for stability, while taking selective small and mid cap exposure focused on balance-sheet strength, execution quality, and earnings visibility.

Valuations across market segments continue to show clear differentiation. Large-caps are trading broadly in line with long-term averages, offering relative stability and valuation comfort. Mid and small-caps, on the other hand, reflect stronger growth expectations and higher risk appetite, as seen in valuations above historical norms. This valuation dispersion underscores the importance of a balanced allocation approach, with large-caps providing a foundation of stability and mid and small-caps requiring a more selective, bottom-up focus.

What should investors do?

Investors can focus on sectors where the valuations are reasonable and where they can find a tailwind linked to the economy. Asset allocation is the key, and as they might have seen in the last couple of years, allocation to precious metals/global equities must have saved their portfolio. While not everyone was able to allocate at the right time, there was one mutual fund theme that we have been keeping in all our investor portfolios since inception, i.e. Multi-Asset Funds or MAFs or Multi-Asset Allocation Fund, which was the outperformer in each of our investor portfolios. Now that investors have learnt this in the last year, they should stick to asset allocation in their portfolios. Another theme that we have liked this year is a Multi-Factor Fund, which is a new category that came in this year; however, it can be very useful at times when the markets are narrow. Lastly, SIFs as a category should be considered in a portfolio of a seasoned investor who understands the market to some extent and has a considerable portfolio.

How would I know my asset allocation mix?

We have created a risk profiler which helps us gather some important investor information, and this gives us a score for every investor. On the basis of this score, we are creating an asset allocation mix for you which helps you achieve your short and long term financial goals. To know the right asset allocation mix for yourself, click on the link and get started.

You can also sign up for our app and get started with our all-in-one investing app. This will help you to make goal-based investments, and with our guidance, you will be able to do the right asset allocation and optimise your portfolio returns.

Our all-in-one link to access all our resources is here: https://linktr.ee/sage.capital

Apart from all this, feel free to call/WhatsApp us at +91-8369664202 or reach our team at invest@sagecapital.in

Wishing you and your family a Happy New Year ✧° ༘⋆2026✧° ༘ ⋆ in advance!!! 🎉🥳🎊🎁

Warm Regards,

Nikhil Gupta

www.sagecapital.in