Rising incomes, rural recovery to power corporate India’s 2026 growth

Mumbai: The performance of corporate India is expected to improve in 2026 compared with the previous year given the rising disposable income, improving rural economy, sustained capital expenditure in the infrastructure sector and softening crude oil prices, which may partially offset the impact of depreciating rupee on fuel costs. ETIG offers a snapshot of what to expect from some of the major sectors in the new year. Automobiles The demand momentum is expected to continue for automobile companies in the early part of 2026, driven by affordability due to GST rate cut, festive spill over, and marriage season. In the later part of the year, it is likely to normalise with premiumisation, electrification, and cost management emerging as dominant themes. For passenger vehicles (PV), entry-level cars and value SUVs are likely to remain key drivers, supported by rural recovery and financing availability. Companies are likely to raise prices in the new year to compensate for the costs associated with the Corporate Average Fuel Efficiency (CAFE) norms pertaining to fuel efficiency and emissions. The first half of 2026 is expected to show high single-digit growth, aided by new launches and export traction. This may, however, reduce to low single digit in the second half as the GST boost fades and base effect kicks in. Two-wheelers are likely to deliver steady growth driven by scooters and premium motorcycles. Electric vehicles (EV) adoption is facing near-term headwinds as GST revision has widened the affordability gap against conventional fuel (ICE) models. Maruti Suzuki India, Mahindra & Mahindra and TVS Motor Company look well positioned. Banking and finance After a year of muted growth, the banking sector is poised for a rebound in credit and an improvement in net interest margins (NIMs). At the end of November, advances grew 11.5% year-on-year while deposits rose 10.2%, according to the RBI data. After peaking at 20% in FY24, credit growth slowed to 11% in FY25 as banks turned cautious amid rising stress in unsecured loans. In 2026, credit growth is likely to remain at 11-12%, driven by micro, small and medium enterprises (MSME) lending and gradual improvement in industrial and retail segments, according to Kaitav Shah, lead BFSI analyst at Anand Rathi Institutional Equities. The RBI's 125-basis-point repo rate cut through four reductions in 2025 is expected to keep lending rates low, supporting credit growth in 2026. Policy measures such as lower risk weights, relaxed large exposure norms, and higher limits on loans against shares will further aid recovery. While one more rate cut is expected in early 2026, consensus suggests the easing cycle is over. Deposit repricing should conclude by mid-2026, helping NIMs stabilise in the first half of FY26 and expand later. Asset quality is likely to remain benign, though MSME and unsecured segments may see some stress. Lenders such as SBI, HDFC Bank, ICICI Bank, Axis Bank, Federal Bank, and AU Small Finance Bank are expected to benefit from the credit revival and margin expansion. FMCG After a challenging phase marked by GST transition and erratic monsoons, fast-moving consumer goods (FMCG) sector looks set for growth. Analysts expect consumption to strengthen in 2026 as inflation eases, rural demand remains resilient, and premiumisation gains momentum. Urban demand, muted last year, may also get support from interest rate cuts. Premiumisation continues to gain momentum across categories such as shampoos, detergents, and packaged foods. Organised players in jewellery and liquor are expanding share as unorganised competitors grapple with inventory and working-capital constraints. The retail segment is expected to benefit from aggressive expansion of value formats and QSR chains into Tier-II and Tier-III towns, buoyed by rising disposable incomes and aspirational consumption. Staples are expected to deliver steady volume growth, aided by GST benefits and government measures to boost rural incomes. Titan, HUL, Britannia, and Marico are the top picks of analysts from the sector. Information Technology Artificial Intelligence (AI) will continue to dominate the client conversations for the software exporters in 2026 with more vendors forging partnerships in the related segments. That raises hopes of improving the ramp up rate of projects after facing delays over the past six-eight quarters. The pass-through of AI related productivity gains to clients will likely keep the top line growth muted in the near term while the automation of processes may offer support to operating margins. IT companies maintained a higher employee utilisation rate in 2025 while limiting the extent of hiring, aided by lower attrition rates. The trend is likely to persist in 2026 as well given the increasing adoption of AI processes. Among the top tier companies, TCS and Infosys look well placed in the current environment while Persistent Systems and Coforge hold promise among the mid-tier companies. Metals Domestic steelmakers had a tough CY2025 as earnings were hit by a sharp fall in steel prices. Coking coal prices are expected to stay under pressure in 2026 due to weak global steel output and oversupply. Steel prices, however, are likely to remain firm, supported by infrastructure demand and imposition of the safeguard duty on cheap imports. The aluminium outlook is strong, driven by rising demand and tight supply with China near its production cap and steady demand from electric vehicles (EV), solar, and infrastructure sectors. Indian copper producers are seen as major beneficiaries of an upward price bias. Kotak Securities expects MCX copper prices to remain firm in 2026, supported by structural supply deficits and strong demand from EVs, renewables, and AI data centres. JSW Steel, Jindal Steel & Power, Hindalco, NALCO, and Hindustan Copper are expected to outperform peers. Oil and Gas Crude oil prices softened in 2025 amid bouts of volatility. Brent crude fell by around 22% to $61 per barrel by the end of December with the average price for the year falling by 14% year-on-year to $69.9. Sector experts predict a sustained fall in the new year driven by a persistent supply surplus and modest demand growth while geopolitical disruptions such as production uncertainty from sanctioned exporters or seasonal supply adjustments may offer intermittent support. The US Energy Information Administration (EIA) forecasts Brent crude near $52-$55 per barrel for much of 2026. Lower oil prices will put pressure on earnings of upstream (exploration and production) companies such as ONGC and Oil India. Every $5 per barrel change translates to roughly a 7-10% earnings swing for these companies according to ICICI Securities. In case of downstream (refining & marketing) companies, softer crude and feedstock prices including naphtha may help margins. For city gas distributors (CGD) & gas transporters, near-term pain may come from US-linked Henry Hub price movements and rupee weakness. Every ₹1 per standard cubic metre reduction in gas prices can boost the earnings of CGD companies by about 14-22%, according to ICICI securities. Reliance Industries, Indian Oil Corporation, Bharat Petroleum Corporation, Indraprastha Gas, and Gujarat Gas may benefit from falling crude oil prices.126296401 Power The power sector enters 2026 with a dual focus on demand recovery and faster infrastructure execution. The International Energy Agency expects electricity demand in India to grow by 6.6% in 2026, driven by stronger industrial and services activity, after a subdued 1.5-2% growth in 2025 caused by prolonged monsoons and a high base effect. Key growth drivers include robust industrial output, rapid urbanisation, and the expansion of AI-driven data centres. According to MNRE and CEA, India added a record 35.5 GW of capacity between April and November 2025, including 31.2 GW from renewables and 4.3 GW from thermal power. While analysts expect the momentum to continue, the main challenge will be to address transmission bottlenecks and integration of large-scale battery energy storage systems (BESS). NTPC, Tata Power, Adani Power, Power Grid Corp, Waaree Energies, Adani Green Energy, and Suzlon Energy are expected to outperform peers. Pharmaceuticals The pharma sector's growth in 2026 will be driven by the domestic market led by rural penetration, European market, and new product launches. The US market growth is expected to moderate to mid-single digit due to price erosion and declining sales of some key drugs. A key factor to watch in the US market is the tariff stance. A proposal to peg US drug prices to the lowest among developed nations if implemented will squeeze margins of Indian exporters. Glutide drugs (GLP) are likely to be a major opportunity for the Indian pharma sector with patents of some variants expiring in 2026 across various markets in the world. Over the next three-five years, GLP-1s are expected to add 1-2% growth to the domestic pharma market and form 4-5% of the market and up to 30% of the diabetes market. Sun Pharma, Lupin, and Torrent are well-placed, with innovators retaining premium share while generics dominate volumes.