Broad-based rally lifts benchmark indices on upbeat corporate updates, improved valuations and hopes of stronger earnings growth.
Indian equity markets kicked off 2026 on a strong footing, with benchmark indices scaling fresh record highs on Friday, as positive corporate updates and improving earnings expectations boosted investor sentiment after a volatile end to last year.
The Nifty 50 rose as much as 0.7 per cent during the session to touch an all-time high of 26,331, while the BSE Sensex climbed about 0.6 per cent to around 85,750 in afternoon trade. The gains marked a sharp turnaround from December, when markets had pulled back amid sustained foreign portfolio outflows.
Analysts said the rally reflects growing confidence that corporate earnings will remain resilient in the coming quarters. Strategists at Morgan Stanley said they expect earnings to beat expectations, helped by regulatory stability from the Reserve Bank of India, further economic reforms by the government, and the possibility of a trade agreement between India and the United States in the current quarter.
Indian equities had underperformed several emerging market peers in 2025, but that period also led to a meaningful correction in valuations. With growth expected to improve in the months ahead, analysts believe the market could now be positioned for a positive surprise on the earnings front.
Gains on Friday were broad-based, with 15 of the 16 major sectoral indices ending higher. Banking stocks led the advance, as both private and state-run lenders rose to fresh peaks, supported by optimism over credit growth and asset quality. Nifty Bank index rose 0.7 per cent, with both private lenders gaining 0.5 per cent and public sector banks jumping 1.2 per cent, all hitting fresh highs.
Auto stocks also advanced, with the auto index rising 1.2 per cent, driven by strong December sales at two-wheeler makers such as Hero MotoCorp and TVS Motor.
In contrast, FMCG stocks slipped after ITC fell 4 per cent on concerns over a potential earnings hit from the recent cigarette tax hike, dragging the sector lower. Metal stocks outperformed, with the metals index climbing 1.4 per cent, supported by higher global metal prices amid a weaker US dollar and signs of stronger industrial activity in China.
Sentiment in the sector was further boosted by the Indian government’s move to impose import tariffs on certain steel products to curb Chinese imports and support domestic producers.
Broader markets mirrored the upbeat mood, with mid-cap and small-cap indices gaining up to 1 per cent, signalling a pick-up in risk appetite among investors.
As markets begin the New Year at record levels, investors are now watching corporate earnings, policy signals and global developments closely to assess whether the rally can be sustained through the early months of 2026.
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