The year 2026 has begun on an uneasy note for investors. After a strong multi-year run across several asset classes, markets are now grappling with mixed corporate earnings, global policy uncertainty, AI-led disruption in technology, and volatile commodity prices.
No major asset class has delivered a decisive breakout so far in 2026. In such an environment, discipline, not prediction, becomes the most valuable investment tool.
Here is a structured look at how different asset classes are performing and how investors should respond.
Domestic Equity: Under Pressure, Yet Not Broken
Indian equities have struggled to find momentum in the early part of 2026.
The Nifty 50 is down YTD by 2.7% and the Nifty 500 is down 2.38% as on 24 February. This comes on the back of a mediocre year in 2025.
What’s Dragging the Market?
Mixed Q3 corporate earnings have capped upside. Margin pressures, patchy demand and selective growth have kept broad-based momentum in check.
IT Sector: AI Shockwaves
The trigger for sharp corrections in IT stocks has been rapid advancements in Artificial Intelligence, which India has yet to catch up with. The new enterprise-focused tools from Anthropic’s Claude created jitters globally and shook the Indian IT stocks, too. However, Indian IT firms are predominantly services-oriented rather than product companies, negative sentiment spilt over. This was driven by the fear that automation could compress billing models and reduce long-term outsourcing demand.
Strength in the Indian Equity Market in 2026 so far has been limited to Financials, PSUs and Automobiles. Most other sectors have lagged, making the rally narrow and fragile. Themes like Consumption have defied hopes. Weakness has been across market caps.
The recent US–India trade deal offered only a temporary sentiment boost. The US Supreme Court order striking down Trump’s tariffs appeared to provide a further sweetener, lowering the tariffs to 10% from 18% as per the deal. This was also too short-lived as Trump immediately followed the verdict with the announcement of 15% global tariffs. Uncertainty is back in play concerning US tariffs, keeping the markets on their toes.
Adding to these worries is the geopolitical tension between the US and Iran.
The already shaky beginning of domestic equities could continue until earnings are on a healthy trajectory. Until the dust around US tariffs settles and provides clearer clarity on the final rates, markets may not be able to rejoice, as exporters will be left directionless.
FIIs would also await healthy earnings and tariff clarity to resume with meaningful inflows. Until such time, the indices will navigate the volatile way, and this phase would belong to the stock pickers, which is going to be a hard task.
Precious Metals: Volatile But Structurally Supported
In 2025, precious metals emerged as the leading asset class, overshadowing all others.
Following a remarkable surge in 2025 and a soaring ascent in January, Gold and Silver have experienced a slowdown. Both precious metals, Silver and Gold, experienced significant corrections of 38% and 20%, respectively, from their highs, and have encountered volatility in the aftermath. After a little recovery, gold is now 10% below its peak, while silver is down 28%.
The correction from recent highs has raised concerns about 2026 performance. However, the structural case remains intact for both precious metals.
Gold’s Macro Tailwinds
• Central banks continue to accumulate gold. China’s central bank, for the 15th consecutive month, has bought gold to increase its gold reserves. As per the survey by the World Gold Council, 95% of central banks are likely to increase their gold reserves.
• Countries like Poland have increased reserves to record levels.
• De-dollarization themes remain alive.
• Global debt levels are elevated.
• Geopolitical uncertainty persists.
• Preference for real assets remains strong.
Demand forecasts for gold have been revised upward, especially for bars and coins. Prices appear to be consolidating rather than collapsing.
Silver: High Beta Metal
India’s silver imports are at record highs, reflecting strong industrial and investor demand. Silver’s utility across key cutting-edge technologies like Solar Panels, EVs, Semiconductors and 5G transmission is real and has laid a long runway for growth. Meanwhile, China’s net silver exports have dropped sharply, tightening global supply. Silver is in short supply for the 6th consecutive year, and mining of silver is still an underinvested sector.
Silver’s dual nature, industrial metal plus store of value, gives it relevance. But investors must expect silver to witness higher volatility compared to gold.
Precious metals deserve allocation in portfolios. Tariff-related uncertainties and ongoing geopolitical tensions would favour them.
But investors should not expect the rally of 2025 to repeat in 2026 when they make fresh investments. Given volatility expected to persist, phased buying in Gold and Silver Funds via STP would be advisable. A dynamic mix of Gold and Silver would augur well for those who wish to invest in the duo with calculated risk.
Debt: Rate Cut Hopes Fading
The announcement of Kevin Warsh as the next Federal Reserve Chairman has dimmed expectations of aggressive rate cuts in the US.
If US rate cuts are limited or delayed, India’s room for monetary easing also narrows.
This environment suggests:
• Moderate rather than stellar returns from debt funds
• Lower probability of duration-driven rallies
• Stable but not exciting performance
Debt would continue to play its role as a stabiliser, not a return accelerator.
Global Equities: The Relative Bright Spot
While all the above asset classes are on a sticky wicket, the one area that looks bright is global equities.
Many global markets delivered returns superior to India in 2025, and this trend continues in 2026.
YTD as on 24 February, the S&P 500 is up by 0.4%, Brazil Bovespa is up by 18.79%, Korea’s Kospi has seen a phenomenal surge of 42%, UK’s FTSE is up 7.52%, France’s CAC 40 is up 4.54%, Nikkei 225 is up 13.87%, and Euro Stoxx 50 has moved 5.57%. China’s CSI 300, Hang Seng and Taiwan Weighted are up 2.4%, 3.74% and 16.61% respectively.
All of these major indices have outperformed India so far YTD.
The relative underperformance of Indian equities highlights the importance of geographic diversification. This should not be treated as a tactical bet for this year, as India is relatively underperforming, but rather as a long-term strategy for better portfolio diversification.
That said, the allocation to global equities should be only 10-15%, regardless of how big their outperformance relative to India happens to be. Also, so far, global equity investing for most Indian investors has been predominantly US-focused or completely US. It’s time to change that too and spread it across geographies. Global Emerging Market Funds offered by Mutual Funds give you a good mix of Emerging Market Equities like China, Japan, Korea, Taiwan, Hong Kong, etc. Among global equities, it may be ok to have a slightly higher allocation to the US, given its dominance in most new generation businesses and, otherwise, with no matching alternatives elsewhere.
As many Mutual Fund AMCs have exhausted their global investment limits, many have closed fresh purchases or limited purchases in their schemes. However, as an alternative, one can invest through outbound Gift City Funds, which invest in Global Equities and Gift City Funds do not have a ceiling on global exposure. Though originally Gift City Funds had a minimum subscription amount of $150,000, it is now available in retail form with a minimum subscription amount of $5000.
How Should Investors Navigate 2026?
In a year where no asset class is delivering a smooth ride, the answer is not aggressive repositioning; it is disciplined asset allocation.
A Sensible Framework:
1. Domestic Equity: Core allocation but highly selective.
2. Global Equity: 10–15% to diversify geographic risk.
3. Debt: Stability anchor with moderate return expectations.
4. Gold & Silver: Strategic hedge allocation. Steam is not over; stagger purchases.
5. Avoid speculative concentration in crypto that are already down 40% or above.
2026 is not a crisis year. It is a transition year. Earnings need to stabilize.
AI disruption needs to mature into monetization. Rate clarity needs to emerge. Commodity volatility needs to settle.
Until then, portfolios built on discipline, diversification and realistic expectations will outperform portfolios built on emotion, recency bias and overconcentration.
When markets are shaky, asset allocation becomes the real alpha. True Asset Allocation is evolving, and Global Equities makes Asset Allocation complete, not restricting it to Asset Classes but also to different geographies.
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