‘Key theme in 2026 will be discretionary consumption’

Improving liquidity, income-tax relief and GST rationalisation are expected to lift discretionary spending in 2026.

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Sectors such as banking, defence, power and cement are likely to offer investing opportunities. Kailash Kulkarni, chief executive officer, HSBC Mutual Fund tells Saikat Neogi income-plus-arbitrage fund of funds can be a tax efficient way for fixed income investors with a two-year horizon to earn regular income. Edited excerpts:How do you expect the equity markets to perform this year?

DEBT PORTFOLIO

This year calls for a focus on domestic growth and selective cyclicals. Discretionary consumption stands out as a key theme, supported by a clear policy push to revive demand. The RBI’s shift towards easier monetary conditions is improving liquidity and credit availability, while government initiatives such as income-tax relief and GST rationalisation have supported consumption. Together, these measures are expected to gradually lift discretionary spending. At the same time, private capex is likely to start picking up after several years of government-led investment. Stronger corporate balance sheets, improved utilisation levels, and favourable financing conditions should support this shift. Financials remain structurally attractive, driven by financialisation of savings, steady credit penetration, and operating leverage. Platform and asset-light businesses also offer long-term earnings potential as scale benefits and efficiency gains continue to play out.

Which are the sectors investors should capitalise on?