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After a year marked by impressive gains in gold and metals, the outlook for Indian equities, particularly in the small and mid-cap space, may be more promising in 2026. According to Dipan Mehta, Director at Elixir Equities, the shift could bring equities back into focus after their recent struggles.
Equities Stealing the Spotlight in 2026
– Mehta shared insights in a recent discussion with ET Now, reflecting that 2025 served as a reminder that no asset class remains a frontrunner indefinitely. He stated, “If you had asked me a year ago, I would have said equities all the way. But 2025 belonged to gold. Hardly anyone predicted the remarkable rally in precious metals.”
– While multi-asset strategies proved successful in the past year, Mehta anticipates a significant rotation back into equities in 2026, especially in segments that have been overlooked for years. “Small- and mid-caps have been in the wilderness for two to three years. Earnings have now caught up, and valuations are much more attractive,” he added.
Copper and Metals: A Double-Edged Sword
– Addressing the rally in copper stocks such as Hindustan Copper, Mehta pointed to the strong demand driven by electrification and enhanced power distribution. However, he cautioned about the stock’s current valuation, suggesting, “Copper demand will grow structurally, but Hindustan Copper appears expensive even by metals standards,” highlighting potential volatility and uncertainty regarding capacity expansion.
– Among metals stocks, Mehta considers Vedanta a preferable long-term investment. He mentioned, “The proposed demerger could alleviate concerns related to holding-company debt. Once the split occurs, the debt burden should ease, while core businesses such as zinc and aluminum are positioned for strong growth. The group also stands as one of the lowest-cost producers globally.”
Sector Highlights for 2026
– Adani Ports: Mehta remains optimistic, citing strong operating leverage and long-term trade potential. “Ports are an excellent business model. The costs are primarily fixed, and as trade volumes increase across acquired assets, earnings can significantly improve,” he said, emphasizing the firm’s reasonable valuations amidst global trade challenges.
– Coal India: Despite its low valuations and attractive dividend yield, Mehta expressed caution, labeling it more of a trading opportunity than a long-term wealth generator. “Coal India could experience rallies if coal prices rise, but I don’t see it as a sustainable wealth creator,” he noted.
– Automobile Sector: Mehta is particularly bullish on the auto industry, especially commercial vehicles (CVs). “November CV numbers were exceptionally strong,” he mentioned, naming Ashok Leyland as his top pick due to its execution capabilities, involvement in EV buses, and improved market share.
– For the passenger and premium segments, he favors Mahindra & Mahindra, Eicher Motors, and TVS Motor. He highlighted TVS for its consistency, technological leadership, and performance across various market cycles.
– Diversified Lenders: In the financial sector, Mehta advocates for investments in diversified, multi-product lenders. He underscores his confidence in Cholamandalam Investment and Finance because of its robust risk management and recovery frameworks, suggesting investors focus on firms like Bajaj Finance and L&T Finance over single-product lenders.
Conclusion: Equities Regaining Momentum
Overall, Mehta posits that 2026 could herald a resurgence for equities after a metals-dominated year. He emphasizes the importance of strategic stock selection and sector rotation in navigating the shifting market landscape. “Every asset class has its moment. The key is to remain invested where earnings visibility and valuations align,” he concluded.
As the market prepares for potential shifts, investors should keep a keen eye on equities to see if they indeed steal the spotlight in 2026.