India’s markets opened 2026 on unstable footing as equity gains faded, the IT sector wrestled with AI shocks, tariff risks muddied trade, and precious metals zigzagged. Investors and fund managers entered the new year searching for steadier footing and fresh playbooks to manage risk.
The early weeks have tested confidence in Mumbai and beyond. Equity indices slipped from late-2025 highs. Technology shares lagged on margin fears. Import and export duties drew new scrutiny ahead of key global trade talks. Gold and silver swung with every inflation whisper and dollar move. The message, say strategists, is clear: the easy beta is gone, and process matters again.
Equities Lose Momentum As Year Opens
After a strong run through much of 2025, Indian equities cooled as profit-taking met weaker global cues. Traders flagged thin liquidity during the holiday stretch and a tighter stance from major central banks. Domestic cyclicals held up better than high-growth names, but leadership looked narrow.
Portfolio managers pointed to stretched valuations in select pockets. Mid- and small-cap shares, which outperformed last year, showed wider day-to-day swings. Earnings season will be the next test. Companies tied to consumption and credit growth face rising expectations, even as input costs remain a wild card.
AI Upheaval Hits IT Services
India’s IT exporters started the year under pressure. Clients are piloting generative AI to cut support costs, automate testing, and streamline help desks. That puts legacy billing models at risk and squeezes rates in commoditized work.
Large vendors are shifting talent into AI engineering, data pipelines, and security. They are also bundling software with services to defend margins. Smaller firms feel the strain sooner. Hiring plans have cooled, bench sizes are under review, and deal cycles look longer as buyers reassess budgets.
Analysts caution against reading only the downside. AI demand can create new revenue lines around integration and governance. But the transition timeline is uncertain. Investors are rewarding firms that show clear pricing power and measurable productivity gains.
Tariffs And Trade Clouds
Tariff chatter returned to center stage as major economies weighed new measures on tech, metals, and clean energy inputs. For India, the knock-on effects run through chemicals, electronics assembly, and auto components. Exporters are hedging currency and reworking supply chains to limit surprises at the port.
Policy watchers expect a busy calendar of trade consultations. Any move that lifts input costs could feed into inflation, complicating rate paths. Domestic manufacturing incentives help, but cannot offset every external shock. Market reaction may hinge on clarity in the next round of notifications and whether exemptions ease cost spikes.
Safe Havens Whipsaw
Gold and silver swung sharply as bond yields shifted and energy prices flickered. A stronger dollar at times capped gains, while geopolitical jitters offered bursts of support. Local demand tracked wedding season and festival calendars, adding a layer of seasonality to global flows.
For multi-asset funds, precious metals remained a hedge, not a hero. Position sizes rose on down days for equities and fell into strength. The trading playbook favored nimble rebalancing over bold directional bets.
What Investors Are Doing Now
Advisers reported a steady tilt to quality across stocks and credit. Investors who chased momentum in 2025 are trimming single-factor exposure and adding balance.
- Rebalancing toward large-cap and value-tilted funds
- Using short-duration debt for stability
- Keeping a measured allocation to gold as a hedge
- Favoring global funds with strict risk limits
One theme cut across playbooks. As a senior strategist put it:
“Discipline, diversification and asset allocation emerge as the real alpha.”
That view reflects hard lessons from the past year. Concentrated bets paid until they did not. Hedging costs looked high until volatility made them look cheap. Dry powder was inconvenient right up to the day it was useful.
Signals To Watch Next
Investors are watching four signals. First, earnings guidance from IT exporters, which will show how fast AI is changing deal terms. Second, tariff announcements and any exemptions that temper input costs. Third, core inflation and fuel prices, key for rate expectations. Fourth, fund flows into equities after tax-year resets.
Asset allocators also want clarity on fiscal plans and capex momentum. Stable policy and steady public investment could anchor domestic demand even if exports wobble.
The start of 2026 is noisy, but not hopeless. Markets are reminding participants that process beats predictions. A balanced mix of assets, regular rebalancing, and tight risk controls give investors a fighting chance when headlines swing. Watch IT guidance, tariff details, and inflation prints. In the meantime, patience and position sizing may be the most valuable trades on the board.
