Nikhil Khandelwal is the Chairman & Managing Director at Systematix Group
Nikhil Khandelwal, the Chairman & Managing Director at Systematix Group, believes the market is increasingly a stock-picker’s market as valuations narrow and forward PEs stay elevated.
For 2026, he favours quality financials and banks benefiting from credit recovery, capital goods and industrials supported by the private capex cycle and select export-oriented names with stable margins.
However, he believes the investors shouldn’t be overweight on companies in the solar sector that are doing run-of-the-mill business in the solar value chain, while for the sectors that are significantly dependent on government capex, the year 2026 will be muted.
Is the equity market being challenged by rupee depreciation and the delay in the trade deal? Could 2026 turn out to be a surprising year for the equity markets?
Rupee weakness and the delay in the trade agreement are certainly weighing on market sentiment, particularly for export-oriented sectors. The rupee recently touched record lows of around 90.3–90.4 against the dollar, reflecting sustained foreign outflows and external trade pressures.
However, domestic liquidity remains a strong counterbalancing force. Monetary easing has begun to support financial conditions, and SIP flows continue to be robust, which helps maintain market breadth.
If earnings stabilise and domestic liquidity stays healthy, 2026 still has room to surprise on the upside. That said, currency volatility and external flow risks imply that any upside is likely to be more selective rather than broad-based.
Is the Indian market a stock-picker’s market now? If yes, which sectors to buy for the new year?
Yes, the market is increasingly a stock-picker’s market as valuations narrow and forward PEs stay elevated. Investors should prioritise earnings visibility, margin resilience, and strong balance sheets.
We favour quality financials and banks benefiting from credit recovery, capital goods and industrials supported by the private capex cycle, and select export-oriented names with stable margins.
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Pharma also looks attractive given the improving US pricing and steady domestic market demand. Themes around circularity, like recycling, sustainability-led manufacturing, and resource efficiency, are also gaining momentum and could offer differentiated long-term opportunities in 2026.
Do you see some plateauing in the IPO market going ahead, or will 2026 be a better year than 2025 for the primary market, given the strong IPO pipeline?
The outlook for the IPO market in 2026 remains robust. Current data shows India’s IPO pipeline for the coming year is projected to exceed Rs 2.55 lakh crore, with around 88 companies already having SEBI approval to raise roughly Rs 1.16 lakh crore and another 104 pending clearance for about Rs 1.4 lakh crore of fundraising. This builds on a very active 2025 primary market that saw record capital mobilisation.
These figures suggest that 2026 can be at least as active as 2025, if not more. That said, the success of these deals will hinge on pricing discipline, investor appetite, and underlying fundamentals. In short, 2026 should be an active and promising year for the primary markets, but selectivity around quality, profitability, and governance will remain critical for investors navigating this pipeline.
Do you think the pain in the broader market is over?
The worst of the correction seems behind us, but the recovery will remain selective. While valuations have cooled and domestic flows are supportive, not all segments will rebound uniformly. Quality companies with strong cash flows, governance, and margin visibility will lead the rebound, while weaker names may continue to lag. This remains a selective market rather than a tide that lifts all boats.
Which sectors would you prefer to stay away from in 2026?
We believe that government capex will be quite moderate in 2026 limited fiscal headroom available with the union and state governments. Hence, we believe that segments of the economy which are significantly dependent on government capex – particularly areas like road, water, railways, etc. will see a muted year.
We also believe that the solar industry is seeing a significant capacity creation, especially on the modules and cells side. This will put pressure on the pricing of these products, and hence, the earnings momentum in the sector is expected to be slow. Given that, we believe that the investors shouldn’t be overweight on companies in this sector that are doing run-of-the-mill business in the solar value chain.
Do you think the US Federal Reserve has completed its rate-cut cycle, with no cuts likely in 2026 following the latest Fed policy?
It’s too early to conclude that the Fed has fully completed its rate-cut cycle. The latest communication suggests a pause, but the Fed has been clear that policy will remain data-dependent. If US growth moderates or inflation continues to drift toward the 2% target, there is still room for additional cuts in 2026. On the other hand, if the economy remains firm and labour markets stay tight, the Fed may prefer to hold rates steady for an extended period.
In essence, the Fed is in a wait-and-watch mode rather than signalling a definitive end to easing. Markets should prepare for a flexible, data-driven approach rather than a fixed policy path.
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