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 PL Wealth, the wealth management arm of PL Capital (Prabhudas Lilladher), in its latest report Market Outlook – February 2026, cited that while Indian equity markets are currently navigating a phase of consolidation, the broader structural trajectory of the economy remains firmly intact, with medium-term risk-reward dynamics gradually improving. According to the report, global uncertainties, currency fluctuations and earnings recalibration have tempered near-term sentiment. However, the underlying foundation for the next leg of market expansion is steadily strengthening, supported by fiscal momentum, macro stability and improving investment visibility.

The Union Budget for FY27 has reinforced policy continuity and long-term growth intent, with capital expenditure rising to ?12.2 lakh crore and the fiscal deficit targeted at 4.3% of GDP. The government’s sustained emphasis on infrastructure development, logistics expansion, manufacturing competitiveness and digital capacity building signals a structural growth blueprint rather than a short-term cyclical stimulus. While elevated gross borrowing and treasury supply have led to some upward pressure on bond yields, the capex thrust significantly enhances corporate earnings visibility into FY27 and beyond, particularly across infrastructure-linked sectors, capital goods, defence manufacturing, electronics and industrial supply chains.

The outlook notes that the near term could witness heightened sectoral rotation, especially across valuation-sensitive and flow-driven segments. Investor positioning is expected to adjust dynamically to domestic policy signals and evolving clarity around the India–US trade engagement, which could influence export-oriented and capital-intensive industries. Over the medium term, sectors aligned with infrastructure, defence, logistics, capital goods and select manufacturing themes are expected to remain well supported. Export-driven segments such as engineering goods, textiles, and gems and jewellery may benefit from improving trade visibility and ongoing global supply chain diversification. Investment preference, the report highlights, should tilt toward companies with strong balance sheets, execution credibility and sustainable earnings visibility.

India’s macroeconomic backdrop continues to stand out globally. Growth expectations for FY26 remain robust at 7.4%, with FY27 projected in the 6.8–7.2% range, positioning India among the fastest-growing major economies. Inflationary pressures have moderated meaningfully, particularly at the core level, allowing monetary policy to remain balanced. Liquidity conditions are stabilising and credit growth remains resilient, indicating that the domestic economic cycle may be approaching an inflection point supported by fiscal spending and policy continuity.

Corporate earnings have undergone a reset over the past year, with consensus estimates for FY26 and FY27 revised lower amid global slowdown concerns and sector-specific pressures. However, the pace of downgrades appears to be moderating, and sectoral dispersion remains high. Financials, automobiles, industrials and IT services have demonstrated relative resilience, while consumer-facing and select banking segments have faced near-term headwinds. As government spending gains traction and order inflows convert into revenue growth, earnings recovery is expected to broaden into FY27, providing the fundamental trigger for a more durable market upcycle.

Inderbir Singh Jolly, CEO, PL Wealth Management, said, “Indian markets are currently absorbing global volatility and an earnings recalibration phase, but the underlying domestic fundamentals remain robust. The government’s sustained capital expenditure commitment, alongside strategic manufacturing incentives, strengthens the structural growth runway for corporate India. While short-term movements may continue to reflect global cues, we believe the medium-term opportunity has improved meaningfully. As fiscal execution translates into earnings growth and investor confidence rebuilds, markets are well positioned to transition into a more durable, fundamentals-led cycle.”

Foreign portfolio flows have remained volatile amid global dollar strength and geopolitical crosscurrents, contributing to intermittent market pressure. Encouragingly, domestic institutional participation continues to provide structural support to equity markets, underscoring the deepening of India’s investment ecosystem. Currency stability, though still a key sentiment driver, has shown signs of consolidation, offering incremental comfort to investors.

On asset allocation, the post-Budget framework advocates calibrated positioning across risk profiles. Conservative portfolios continue to maintain a higher allocation to fixed income, while balanced and growth-oriented strategies retain a meaningful equity bias to participate in medium-term opportunities. A modest tactical cash allocation of around 5% provides flexibility in an evolving global environment. Within fixed income, near-term yield firmness driven by supply conditions may persist, but elevated yields improve forward return potential, particularly in high-quality bonds. Alternatives, including infrastructure-linked vehicles such as InvITs and REITs along with private credit strategies, are positioned as effective diversifiers capable of generating relatively stable cash flows amid equity volatility and bond market repricing.

The report also highlights the role of commodities within diversified portfolios. Gold has reasserted itself as a core defensive asset following the US Federal Reserve’s December rate cut, which reinforced expectations that the tightening cycle has peaked. The shift in global monetary policy, combined with ongoing geopolitical tensions including the prolonged Russia–Ukraine conflict and unrest across parts of Europe and South America, has sustained safe-haven demand. In contrast, silver experienced a sharper and more disorderly correction after a parabolic rally to record highs, driven largely by overextended positioning and margin-led deleveraging despite tight physical supply. The divergence reinforces gold’s stability during periods of macro stress, while silver continues to behave as a higher-beta asset influenced by industrial demand expectations and futures market positioning.

Overall, PL Wealth maintains that while the near-term environment may remain range-bound and event-driven, the medium-term outlook is gradually turning constructive. India’s demographic advantage, infrastructure scale-up, manufacturing push and policy continuity collectively reinforce the country’s long-term investment case. As earnings visibility improves into FY27 and macro stability strengthens further, markets are likely to move from macro-driven consolidation toward a more sustainable, fundamentals-led expansion phase.