Markets at a Turning Point; Headwinds of 2025 and Tailwinds Heading Into 2026

As markets transition from a volatile 2025 into the new year, Mirae Asset has outlined the key headwinds that weighed on investor sentiment last year and the tailwinds expected to shape market performance in 2026, according to its annual market outlook.

Headwinds That Defined 2025

Earnings Growth Below Expectations

One of the key challenges in 2025 was muted corporate earnings growth. Several sectors reported slower profit expansion, which limited market upside despite steady domestic inflows.

Valuation Pressure in Parts of the Market

Elevated valuations, particularly in certain mid- and small-cap segments earlier in the year, created pressure as earnings failed to keep pace. This led to corrections and heightened volatility.

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Global Uncertainty and Risk-Off Phases

Global economic uncertainty, shifting interest rate expectations, and geopolitical developments contributed to intermittent risk-off phases, affecting foreign investment flows into emerging markets, including India.

Uneven Consumption Recovery

While demand remained resilient in pockets, broad-based consumption recovery was delayed, with discretionary spending showing signs of fatigue through parts of 2025.

Tailwinds Emerging as 2026 Begins

Improving Earnings Visibility

Mirae Asset expects earnings growth to regain momentum in 2026, supported by operating leverage, stabilising input costs, and steady domestic demand. Earnings, rather than valuation expansion, are expected to be the primary driver of returns.

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More Balanced Valuations

Market corrections during 2025 have resulted in more reasonable valuations across several sectors, improving the risk–reward equation for investors entering 2026.

Gradual Pick-Up in Consumption

The outlook points to a gradual strengthening of consumption trends as 2026 progresses, aided by income growth and easing inflationary pressures. This could support consumer-facing and cyclical sectors later in the year.

Selective Opportunities in Mid-Caps

Mirae Asset highlights a widening opportunity set in select mid-cap stocks, particularly companies with strong balance sheets, consistent cash flows, and earnings visibility.

What This Means for Investors

The shift from 2025 to 2026 marks a move from valuation-led markets to earnings-led opportunities, requiring a selective and disciplined approach rather than broad-based exposure.

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