Nifty 50 To Rise 15% in FY26: Focus Will Remain On THESE 4 Sectors; Defence, Tourism, And More

Amid the looming threat of global trade tensions and geopolitical uncertainty, equity markets in India are poised to grow and outpace other asset classes in the financial year 2025-26. Nifty 50 is likely to grow at a pace of 12-15% in FY26 in the backdrop of anticipated India's GDP, according to smallcase managers.

Sectors like pharma, electronics, auto and auto ancillary, etc are likely to face the heat of Donald Trump-led US administration's uncertain policies. However, strong participation of domestic institutional investors (DIIs) and renewed interest of foreign institutional investors (FIIs) are likely to support the Indian capital market. Meanwhile, stronger-than-expected Q4 results have further heightened analysts' confidence.

Justifying a "cautiously optimistic outlook for FY26" Robin Arya, smallcase Manager and Founder, GoalFi said, "Key positives include a stable government, the prospect of lower interest rates, and potential earnings rebound. While global trade tensions remain a concern and could pose intermittent risks to market momentum, corporate earnings continue to show resilience particularly in the banking, auto, and infrastructure sectors. We believe this year will be of consolidation with earnings improvement in companies and theme-based investing will be prevalent."

Top Sectors To Watch Out For IN FY26

Here are the top sectors which are likely to witness significant gain in the present financial year, according to smallcase managers.

Defence

Strong project capex outlay of Rs 1.8 trillion and a USD 130 billion opportunity are likely to fuel India's defence sector's growth in FY26. According to smallcase managers, expansion would be led by Air Force and Navy modernisation through programs like LCA MK-UA and P-751 submarines.

"Defence electronics is projected to grow at 10-14% CAGR, outpacing the broader sector. Private players are expected to post 25-40% EPS CAGR, versus 15-18% for DPSUs. Key watchpoints include execution risks for HAL and geopolitical supply chain pressures," noted smallcase in a press release issued on Tuesday

Consumer Sector

After a muted growth in FY25, the consumer sector is likely to rebound sharply in the present financial year with an estimated 13% earnings growth. Consumer sector is likely to strengthen due to easing input costs in the second half of financial year 2026, rural demand recovery due to normal monsoon, and potential fiscal boosts due to factors like 8th Pay Commission. As the sector has corrected nearly 35% since October 2024, companies associated with packaged foods, QSR, and personal care are likely to benefit the most.

Tourism Sector

Years after being hit by the unprecedented COVID pandemic, the tourism sector is in an upcycle. A boost in the hospitality sector in India is led by strong domestic demand, limited supply addition and favourable demographics. Demand for hospitality services is likely to grow in the mid to long term, supported by strong economic growth and rising disposable incomes. Due to these factors the sector is likely to deliver double-digit revenue growth.

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Capital Markets

As the Indian capital market witnessed record activity in FY25 due to a massive surge in IPO launches, increased capital formation has supported market stability and growth. Strong stock market trajectory over the last two months has already reversed the year-to-date losses. Considering these aspects the sector is likely to grow with a focus on deepening and broadening market participation.

Nifty 50 Growth Outlook FAQs

Question : Which sectors are expected to face challenges due to US policies?

Answer : Sectors like pharma, electronics, auto, and auto ancillary are likely to face challenges from the uncertain policies of the Donald Trump-led US administration.,

Question : What factors could support the Indian capital market in FY26?

Answer : The strong participation of domestic institutional investors (DIIs) and renewed interest from foreign institutional investors (FIIs) are likely to support the Indian capital market.

Question : What is the anticipated growth for the defence sector in FY26?

Answer : The defence sector is likely to grow due to a strong project capex outlay and is projected to have a growth rate of 10-14% CAGR for defence electronics.,