My Newsfeed

The Nifty 500 rose just 5.5% this year, reflecting uneven earnings growth, valuation concerns, and cautious foreign flows. This seemed like a slow, stagnant year for the stock market, despite strong GDP growth.

The market however, has moved sharply along selective themes. Investors favoured businesses linked to government spending, financial strength, technology, and reforms. As a result, some thematic indices saw strong gains.

Money poured into public sector banks, defence manufacturers, and metal companies building infrastructure. New-age themes like electric mobility and consumption also saw a boost.

Nikhil Khandelwal, MD of Systematix Group, said, “Indian equities are entering 2026 with market performance increasingly driven by earnings growth rather than liquidity. This makes sector selection and company fundamentals far more important than broad index exposure.”

In this edition of Chart of the Week, we break down how specific themes outperformed the broader market and why 2025 became a year where "what" you owned mattered far more than simply "being in" the market.

Financials lead 2025, thanks to structural strength

In 2025, the Nifty PSU Bank index rose over 28.3% as public sector banks strengthened their balance sheets and reduced non-performing assets (NPAs).

NPAs of PSU banks dropped sharply from over 9% in FY21 to around 2.6% by March 2025. Capital levels improved and returns steadily increased. Large banks like State Bank of India now offer good earnings visibility, while mid-sized banks are growing faster. This has built confidence across the sector.

This trend was also visible in the Financial Services 25/50 index, which rose 18% during the year. The Financial Services 25/50 index makes sure no single company dominates. No stock can be more than 25% of the index, and the top two can’t be more than 50%, so it shows the sector fairly.

Alongside lenders, financial market infrastructure companies also delivered steady gains. The Nifty Capital Markets index rose about 14.5%, mainly through rising participation. NSE trading accounts crossed 24 crore in November 2025, marking an annual increase of 20%. Individual investors accounted for about 18.8% of NSE’s total market capitalization in Q2FY26. This represents a 22-year peak in retail investor ownership.

Sudeep Shah of SBI Securities said, "This rally has been underpinned by a surge in equity market participation, record-breaking trading volumes, and a vibrant IPO pipeline." He adds, "As more retail investors joined the markets and F&O activity reached record levels, exchanges, brokers, and investment platforms earned more from transaction fees, margin loans, and other services."

PSU banks and capital market firms formed two sides of the same engine, one supplying credit to the economy, the other channeling savings into financial assets. This combination made financials a core pillar of thematic outperformance in 2025.

Defence and metals ride higher domestic demand

Another driver of returns in 2025 was India’s push toward self-reliance and domestic manufacturing. The Nifty India Defence index rose 15.7% in 2025 as defence spending moved from announcements to actual orders, backed by a record Rs 6.8 lakh crore budget.

Stock gains were led by Garden Reach Shipbuilders, MTAR Technologies and Bharat Electronics which rose 42.4%, 42% and 34.7%, respectively. Their growth was backed by a combined order book value of over Rs 75,700 crore.

The Nifty Commodities index gained 14.8% in 2025, driven by a rising cycle in global raw material prices. Unlike previous, more cyclical years, 2025 saw a steady climb as global demand for industrial inputs outpaced supply. 

The Nifty Metals index led the growth within commodities with a 26.2% surge, reaching record highs in late December. The primary driver was a global copper shortage that pushed prices to an all-time high of $12,960 per ton. 

Hindustan Copper more than doubled in value with an annual gain of 108%, while National Aluminium and Hindalco rose 48% and 43%, respectively, due to their focus on copper and aluminium for the electric vehicle transition. 

Discretionary spending jumps as consumers favour premium brands

Beyond finance and infrastructure, 2025 also marked a visible change in how Indians move and spend.

The Nifty EV & New Age Automotive index rose about 22.5% in 2025, driven by rapid charging infrastructure expansion and falling battery costs. Policy support and lower ownership expenses boosted the entire value chain, from component manufacturers to vehicle platforms.

Performance was led by Ashok Leyland in the electric commercial vehicles segment, which rose 62%, Maruti Suzuki which rose sharply within passenger cars, and TVS Motor which stood as the top gainer in the electric two-wheeler segment. Eicher Motors also rose sharply as it scaled EV operations for its first electric Royal Enfield model. 

The Nifty India New Age Consumption index gained around 17.9%, as urban spending shifted from basic staples to "aspirational" lifestyle brands.

Select turnarounds drove the rally. Nykaa jumped 65% as profits tripled in Q2FY26, helped by tighter costs and growth in its core beauty business. Telecom also staged a recovery, with Vodafone Idea rising 61% after the government converted a large part of its debt into equity, easing bankruptcy fears and enabling a fresh 5G rollout.

A Moneycontrol report noted, "Household spending on non-essentials has increased, as higher incomes drive consumers toward premium and discretionary purchases."

Together, modern mobility and new-age consumption reflected bigger structural changes in the economy. Investors backed companies aligned with these shifts, reinforcing the market’s preference for selective themes.

1. Fortis Healthcare:

Thishealthcare company jumped 5.4% in two trading sessions after announcing plans toacquire People Tree Hospital in Bengaluru. Fortis Healthcare is buying the 125-bed multi-speciality hospital for Rs 430 crore through its subsidiary, International Hospital.

Fortis plans to inject an additional Rs 410 crore over three years to expand the hospital. The deal includes an adjacent 0.8-acre land parcel, enabling the hospital to scale from 125 to over 300 beds. MD & CEO Ashutosh Raghuvanshisaid, “The deal complements the company’s cluster-focused growth strategy in Bengaluru with an overall potential to scale up to over 1,500 beds across seven facilities over the next three years.”

InQ2FY26, revenue climbed 17.3% YoY, while net profit surged 82.4%, powered by its hospital business. Hospital revenue grew 19.3%, fueled by higher bed occupancy, and now makes up 85% of total revenue. Average revenue per bed also improved, thanks to a better speciality mix and strong oncology performance.

Looking ahead, Fortis’s expansion strategy focuses on adding beds within its existing strongholds. After adding 550 beds in H1FY26, the companytargets another 400–500 beds in FY26 and 300–400 more in FY27, through existing facility upgrades. Key projects include capacity additions in Gurugram, Noida, and Greater Noida, with a new hospital planned for Lucknow.

The move earned a "Buy"upgrade from JM Financial, which set a target price of Rs 1,093. The brokerage highlights the hospital's location in a supply-strapped area of North-West Bengaluru, perfectly positioned to capture rising demand. Analysts forecast the hospital's revenue will nearly double to Rs 130 crore by FY27 from Rs 75 crore in FY25. They note that with a second tower operational, its contribution could reach Rs 600 crore and achieve healthy margins by FY32. For Fortis overall, revenue and EBITDA are projected to compound annually at 17% and 26% respectively, through FY28.

2. Phoenix Mills:

Thisrealty stock gained 3% last week after ICICI Directreiterated its ‘Buy’ rating with a higher target price of Rs 2,210, implying an upside of 19%. The brokerage expects demand at Phoenix Mills’ malls to remain firm during the festive and holiday period. Mall spending is growing at close to 20% a year, supported by higher footfalls. 

The demand trend is supported by traction across major retail categories such as entertainment, fashion, and jewellery. A gradual shift toward premium brands has improved store performance and overall spending quality. Based on current trends, ICICI Direct expects the company to achieve its double-digit growth guidance for the ongoing financial year. This stable operating performance provides a base for long-term expansion.

Phoenix Mills plans to scale up its portfolio across retail, offices, and hotels over the coming years. New developments and expansion are expected to drive growth. The company’s balance sheet remains strong, supported by healthy cash flow and low debt. Lease renewals across properties also offer scope for higher rents without significant additional investment.

Recent financials underline this strength. InQ2FY26, revenue rose 22% YoY to Rs 1,115 crore, driven by a recovery in housing sales. Net profit jumped 39%, aided by new mall ramp-ups and tighter cost control in hotels. Looking ahead, Forecaster estimates revenue to rise about 10% in Q3FY26, with a net profit growth of over 40%.

Management sounds upbeat. CEO Varun Parwalsaid the company “plans to add 1–2 million square feet of retail space” each year, while retail head Rashmi Sen pointed to a stronger focus on experiential food and beverage offerings. CFO Kailash Gupta noted that the “average cost of debt has been cut by nearly 10%”, improving the company’s ability to fund growth while keeping finances stable.

3. Aadhar Housing Finance:

This housing finance company rose 1.3% on December 24 after CEO Rishi Anand said AUM is set to grow 20–22% this year, supported by government stimulus and demand from individuals buying homes to live in, rather than speculative purchases by investors focused on resale or rental. He added that H2 is shaping up better than H1, with momentum improving as the year progresses.

The company sees disbursement growth of over 20% in Q3. Asset quality remains stable, with gross NPAs guided at around 1.1% for FY26, improving from about 1.4% in H1. Management also said recent rate cuts will be passed on to customers by the end of the quarter, alongside a gradual easing in the cost of funds.

Anand said, “We see enough demand and balance sheet strength to sustain 20–22% growth over the next three years, which should help us double our AUM in about three and a half years.” 

Separately, the Competition Commission of India (CCI) on November 7 approved Blackstone’s plan to acquire up to 80.2% stake in Aadhar Housing Finance. Analysts say the move could improve access to capital, strengthen governance, and increase competition as global investors step up exposure to Indian housing finance.

Trendlyne’s Forecaster expects Aadhar Housing Finance’s net profit to rise 19.6% to Rs 1,091 crore in FY26, with revenue growing 31.2%. The stock appears in a screener of companies with expensive valuations, as its price-to-earnings (PE) ratio is above the industry average.

ICICI Direct has a ‘Buy’ rating on Aadhar Housing Finance with a target price of Rs 600. The brokerage highlights the company’s stable performance and disciplined lending, and expects the company to deliver 20% annual growth despite industry challenges.

4. Granules India:

The stock of this pharmaceutical company rose by over 6% in the past week after its board approved a massive fundraising plan. The company aims to raise up to Rs 1,462.5 crore through 2.5 crore convertible warrants priced at Rs 585 each, alongside an additional Rs 300 crore via the issue of 51.3 lakh equity shares to non-promoter investors.

Adding to the momentum, the company received tentative USFDA approval on December 22 for its Amphetamine tablets, which target attention-deficit hyperactivity disorder (ADHD), a market valued at $172 million. CMD Krishna Prasad Chigurupati noted that this move “strengthens Granules’ US generics portfolio” and underscores their commitment to “complex dosage forms and value-driven healthcare solutions.”

The company's financial health showed a significant turnaround in Q2, posting a net profit of Rs 120.6 crore compared to a loss of Rs 41.4 crore in the same period last year. This recovery was fueled by strong performance in North America and 7% sequential growth in the formulations business. 

Trendlyne’s Forecaster projects its net profit to grow by 7.4% in Q3FY26 as the company continues to invest in R&D and its CDMO segment. The stock appears in a screener of companies that have shown relative outperformance as compared to the industry over the past month.

Management confirmed that its CDMO platform, which it established through its 2025 acquisition of Senn Chemicals AG, is now fully operational, supported by R&D integration with IIT Hyderabad. The platform is expected to hit profitability by Q4FY26. It also expects 1-2 approvals in controlled substance formulations within 2-3 years.

ICICI Direct has maintained a ‘Buy’ rating on the stock with a target price of Rs 660. The brokerage highlighted the acquisition of Senn Chemicals AG, which has opened new revenue streams in peptide development, though it cautioned that pricing pressures in the US and other regulated markets remain a potential risk.

5. GE Vernova T&D India (GE T&D): 

This industrial machinery firm climbed 7.4% over the past week after securing a 2,500-megawatt (MW) power transmission order from AESL Projects. Power Grid Corporation of India estimates the project cost at about Rs 19,000 crore. Under the contract, GE T&D will set up a terminal station to transmit power from Khavda to South Olpad.

Earlier, on December 17, the company also won a maintenance order from Power Grid to refurbish the 2*500 MW transmission lines at Chandrapur, strengthening its position in high-voltage transmission upgrades. 

Commenting on opportunities in transmission & distribution, MD & CEO Sandeep Zanzaria said, “The government plans to add up to 136 GW of hydro, pumped storage and conventional capacity by 2035, and nearly 100 GW of nuclear capacity by 2047.” He noted that every new power plant needs new transmission lines, which creates steady demand for the industry.

To capitalise on this opportunity, GE T&D plans a Rs 800 crore capex over the next three years. This investment will go towards expanding manufacturing capacity at its Vadodara, Padappai, and Hosur plants to meet rising demand from home and abroad.

In Q2FY26, the company reported strong operational performance. Revenue rose 40% YoY on improved execution across domestic and export orders, while net profit surged 107%. The sharp profit growth reflected a richer product mix and lower employee costs. Both revenue and profit beat Forecaster estimates by a wide margin.

Yes Securities initiated coverage on GE T&D with an ‘Add’ rating and a target price of Rs 3,200. The brokerage highlights Europe—now contributing about 35% of revenue—as a key driver of export growth, noting that local equipment suppliers are operating at near-full capacity. It expects transformer capacity additions to remain elevated through FY29. The analysts project revenue and net profit CAGRs of 30% and 39% over FY26-28.

Trendlyne's analysts identify stocks that are seeing interesting price movements, analyst calls, or new developments. These are not buy recommendations.

The Nifty 50 closed 2025 as one of the most unpredictable years in recent history. What began with optimism around steady growth turned over the months into a stop-start market, that struggled to find direction. By year-end, India lagged global peers, with the index delivering a modest 10.1% return.

That number doesn’t provide the full picture. There were long stretches this year where the market went nowhere, interrupted by sudden, sharp swings that tested investor patience. Unlike the smoother rallies of the past two years, 2025 felt like a constant tug-of-war between hope and fear.

Market stress was visible across earnings, valuations, and sentiment. Rajiv Batra of JPMorgan summed it up: “Indian equities were under pressure due to weak earnings, soft consumption, high valuations, trade headwinds and a weaker rupee,” noting that “policymakers are now clearly focused on reviving domestic growth.”

In this edition of Chart of the Week, we track how policy actions, global trade shocks, currency pressure, and earnings trends shaped the Nifty’s volatile journey through 2025—and why the year looks like a reset before a potential recovery.

An odd marriage: A resilient economy, a hesitant market

One of the biggest contradictions of 2025 was the gap between the economy and the stock market. While equities struggled, the broader economy held up better than expected. India’s services sector, which now contributes about 55% of total economic activity, played a stabilising role. Even as global trade slowed and manufacturing exports came under pressure, demand for services continued to grow.

The stock market, however, focused more on what could go wrong than right, given already high valuations. In H1CY25, analysts cut Nifty 50 EPS forecasts due to weak urban spending, banks seeing slower growth due to a high base, and soft global IT demand.

Valuations added another challenge. Stocks were not cheap enough to attract aggressive buying, but not expensive enough to justify extreme optimism. The result was a market stuck between strong long-term fundamentals and uncomfortable short-term realities.

RBI rate cuts: support came, but slowly

Policy support became the market’s main anchor in 2025, especially as global conditions worsened. The Reserve Bank of India took a clear pro-growth stance, cutting interest rates aggressively to support liquidity and confidence. Over the year, the RBI reduced the repo rate by a cumulative 125 basis points, taking it from 6.5% to 5.25% by December.

The first 25 bps cut in February, the RBI’s first rate reduction in five years, was met with caution. Alongside the rate cut, the central bank also lowered its GDP growth forecast by 20 bps to 6.4%, reinforcing concerns around slowing momentum. As investors focused on tariff-related risks and weaker growth signals, the Nifty slipped instead of rallying.

A second 25 bps cut in April came amid rising trade tensions, leading to an initial dip before a modest recovery led by banks and real estate stocks. June then marked a turning point. A larger 50 bps cut, along with a clear shift in the RBI’s stance, lifted sentiment. Banking stocks surged to record highs as expectations around credit growth and consumption improved.

By the time the final 25 bps cut arrived in December, the move was largely priced in. The Nifty barely reacted, ending the year in a cautious phase. Meanwhile, RBI Governor Sanjay Malhotra said India is in a rare “goldilocks” phase, with steady growth and controlled inflation. He added that rates are likely to stay low for longer, and any progress in trade talks—especially with the US—could lift growth by around half a percentage point.

Global trade shocks tested confidence, and exporters adapted

Global events remained a constant source of stress for Indian markets in 2025, with trade tensions—especially with the US—frequently unsettling investor confidence. In early April, the US imposed 25% tariffs on Indian goods, triggering a sharp fall in the Nifty. Export-heavy sectors were hit the hardest as investors quickly priced in weaker overseas demand.

The situation worsened in late August when tariffs were raised to 50% after India continued importing Russian oil. The market reacted sharply, with textiles, gems and jewellery stocks seeing heavy selling. These repeated trade shocks have deepened concerns about India’s export outlook and added to the market’s overall nervousness.

Currency pressure amplified the impact. The Indian Rupee weakened past Rs 90 to the dollar, making it one of the weakest-performing Asian currencies during this period. While a softer rupee can help exporters, it raises costs for energy imports and foreign debt repayments. Dilip Parmar of HDFC Securities noted that the rupee significantly underperformed regional peers, further weighing on sentiment.

Yet exporters did not stand still. Companies began shifting focus to alternative markets, and the data reflected this adjustment. Exports to China jumped 31% YoY in September–October, while shipments to Saudi Arabia and parts of Europe also increased. These moves helped cushion some of the damage from US tariffs.

By December, sentiment improved as talk of a potential US–India trade deal gained traction. The possibility of easing tariffs in exchange for higher Indian purchases of US energy helped calm markets and offered hope that the worst of the trade pressure may be nearing an end.

Tax relief gives consumption a boost

Alongside monetary support, fiscal measures played an important role. The Union Budget 2025 raised the personal income tax exemption limit to Rs 12 lakh, putting more money directly into household hands. While broader market reaction was muted on budget day, consumer-focused stocks responded positively in the weeks that followed.

JP Morgan estimated that the tax relief could add around 0.6% to GDP over time, gradually lifting consumption. The impact became more visible after the rollout of GST 2.0 in September. The tax structure was simplified into two main slabs—5% and 18%—replacing a complex system that businesses had long criticised.

The immediate effect was seen in consumer durables. Products like air conditioners and large televisions moved from the 28% bracket to the 18% bracket, leading to price cuts of 8–9%. Retailers reported a noticeable jump in footfalls and sales. To offset revenue loss, the government retained a steep 40% tax on luxury items such as premium SUVs.

Earnings bring a turning point

After months of uncertainty, October saw a change in the market's tone. The Nifty rose 4.5%, its strongest monthly gain of 2025, not due to policy announcements, but because earnings were better than feared. The steady stream of downgrades slowed, suggesting profits may have finally bottomed out.

Banks and auto companies led the recovery, reporting stable demand and improved cost control. The results were not spectacular, but they were “less bad” than expected—and that was enough. Motilal Oswal and other brokerages noted that the worst phase of earnings pressure appeared to be behind.

The October rally did not erase the damage of the year, but it shifted the investor mindset. As 2025 ended, the focus moved away from constant downside risks toward the possibility of a gradual recovery in 2026, making the year look less like a downturn and more like an overdue reset.

1. Vishal Mega Mart:

Motilal Oswal retains its ‘Buy’ call on this retail store chain with a higher target price of Rs 170 per share, an upside of 24.3%. Despite an 8.2% drop in the stock price last quarter, analysts Aditya Bansal and Avinash Karumanchi see strength in the stock. Vishal Mega Mart benefits from its diverse product mix, budget-friendly starting prices, major contribution from its own brands, and an efficient cost structure. These give it an edge over both offline and online value competitors.

Management remains confident in achieving double-digit same-store sales growth in FY26, driven by its unique offerings, with around 75% of revenue from its own brands, entry-level pricing, and a loyal customer base. Analysts add that the company's focus on offering premium products helps it capture a larger share of customer spending, particularly during festive seasons.

Bansal and Karumanchi point out that South India's profitability matches the national average, despite lower sales volume, thanks to strong demand for apparel. Encouraged by this performance, the company plans to open more stores in South India. They project Vishal Mega Mart will achieve a 20% revenue CAGR and a 30% net profit CAGR from FY26-28.

2. Waaree Energies:

Emkay reiterates its ‘Buy’ call on this solar module manufacturer, with a target price of Rs 4,260, an upside of 37.6%. Its share price has fallen 2.8% over the last month and 10.4% over the three months. Waaree's planned $30 million investment in United Solar Holding (USH) drives this recommendation. It grants Waaree access to a 1 lakh tonnes-per-year polysilicon plant in Oman. This supports partial backward integration in its solar supply chain.

The Oman plant offers cost benefits, lower energy expenses, and favourable trade terms with markets such as the US and India. This will help Waaree meet the 10-gigawatt wafer-ingot demand for its Nagpur facility. Management expects the plant to begin operations soon and reach full capacity within a year. This ensures long-term supply security and reduces reliance on Chinese polysilicon.

Waaree also added 5.1 gigawatts of module capacity in Gujarat during Q3, strengthening its domestic manufacturing. Analysts Sabri Hazarika and Arya Patel state that the USH investment will enhance scale, integrate the supply chain, and support global expansion. They expect this step to improve margins gradually. They also see Waaree well positioned to profit from rising global solar demand and clearer supply prospects.

3. Lumax Auto Technologies: 

ICICI Direct reiterates its ‘Buy’ rating on this auto parts & equipment producer with a target price of Rs 1,800 per share, an upside of 14.3%. Analysts Shashank Kanodia and Bhavish Doshi see benefits from the company’s strong position in the passenger vehicle (PV) ancillary segment, gains from premium products, and a robust order book.

Management notes that the PV segment generated 55% of the company’s sales in H1FY26, boosted by the acquisition of PV interior supplier International Automotive Components (IAC) India. Analysts add that this acquisition gave Lumax Auto’s product range a boost, particularly in plastic interior modules. It has also expanded business with original equipment manufacturers (OEMs) such as Mahindra & Mahindra.

With a 40% share of EV platforms in its Rs 1,360 crore order book and increasing content per vehicle, the analysts believe the company is well positioned to profit from volume growth and premiumisation among leading OEMs. Kanodia and Doshi write that GST 2.0 reforms will drive two-wheeler segment growth, led by volume recovery. They expect the company to deliver an 18.1% revenue CAGR and a 30.6% net profit CAGR from FY26-28.

4. Aditya Infotech: 

ICICI Securities maintains its ‘Buy’ call on this IT networking equipment manufacturer, with a target price of Rs 1,800 per share, a 15.9% upside. The stock has dropped 6.9% over the past month. Analysts Aniruddha Joshi and Manoj Menon believe Aditya Infotech will continue to gain market share, driven by stronger brand recognition and expanded manufacturing.

Management highlights increased brand-building investments. This includes expanding CP Plus Galaxy stores, which are their specialised outlets for advanced surveillance products, and more advertising. Analysts add that this brand push is crucial to attract consumers and support premium product offerings. The company's partnership with Qualcomm for AI-enabled video security solutions has differentiated its products and improved customer retention.

Joshi and Menon believe the company's planned capacity expansion in Kadapa and a new North India manufacturing unit will improve service speed, cut logistics costs, and enable faster market entry. Analysts add that successful partnerships with semiconductor players will boost product performance and long-term cost efficiencies. They expect the company to deliver revenue and net profit CAGRs of 24.3% and 65.2%, respectively, from FY26-28.

5. Shriram Finance: 

Axis Direct reiterates its ‘Buy’ call on this NBFC, with a target price of Rs 1,125, an upside of 17.5%. Analysts Dnyanada Vaidya and Abhishek Pandya cite MUFG Bank's planned strategic investment as the main driver of this positive outlook. MUFG intends to buy a 20% stake for roughly Rs 841 per share via a preferential allotment. 

This Rs 39,618 crore deal marks India's largest foreign direct investment in its financial services sector. The capital infusion will strengthen Shriram Finance's fundamentals. It is also expected to fuel faster growth in areas like new commercial vehicles and MSMEs. Management believes the partnership will boost capital reserves, simplify fundraising, and improve governance. MUFG-appointed directors will help guide the company's strategy.

Vaidya and Pandya expect lower funding costs, possibly due to a credit rating upgrade. If the deal closes in FY27, Shriram Finance's net worth could nearly double. They foresee a 17% CAGR in assets under management from FY26-28 and margins improving by 80-90 basis points in FY27-28. Although equity dilution might limit return on equity, analysts predict overall returns will rise due to better profitability.

Note: These recommendations are from various analysts and are not recommendations by Trendlyne.

(You can find all analyst picks here)

The US stock market in 2025 was a season of plot twists and jump scares. In April, the S&P 500 index corrected by over 10% due to the Trump tariffs. By June, it ripped to fresh highs after President Donald Trump softened his stance and investors piled headfirst into anything even remotely AI-related. So far in 2025, the index is up by more than 17%, reaching a level of 6,878 by December 23. But more than half of those gains came from a few mega-cap giants worth $200 billion or more.

This sets the stage for a very different 2026. According to David Kostin of Goldman Sachs, the easy phase is over. The era of rising multiples is ending, and the next leg of the bull market will lean less on hype and more on hard earnings growth.

Not everyone is convinced returns will be exciting. Savita Subramanian of Bank of Americawarns that slowing share buybacks could cap S&P 500 gains at a modest 4% next year, with a target price of 7,100.

Jean Boivin of BlackRocksays, "The market is moving from a policy-driven phase to a productivity-driven one." He suggests that as capital spending translate into results, the focus must move toward infrastructure.

Let’s look at four trends that will shape 2026 returns.

1. The AI bill comes due next year

For the past three years, markets treated AI like a free lunch. Productivity gains were assumed, and valuations ran ahead of reality. By 2026, hyperscalers are expected to spend over $527 billion on capital expenditure, sharply higher than earlier estimates of $465 billion. The money is pouring into chips, data centers, and power-hungry infrastructure, to keep chatbots like ChatGPT, Gemini, and Claude running smoothly, and to make sure they’re ready to handle a (highly disruptive) shift of economic activity from humans to machines.

The final bill may run into the trillions. The financing is coming from venture capital, debt and, lately, unconventional circular financing arrangements that have raised eyebrows on Wall Street.

A flood of debt sales from Big Tech could weaken the credit market on both sides of the Atlantic. Wall Street underwriting to fund AI and data centers is soaring, but would-be creditors are starting to worry about being compensated for the risks of a bubble. Tech firms are expected to float as much as $1.5 trillion of debt by 2028.

Morgan Stanley warns that this could push up borrowing costs as investors may demand higher returns to absorb the supply. KKR’s Raj Agrawal says, “Some of these investments are likely not going to work out, that’s just the reality when you have this much capital moving this fast.”

The gap between infrastructure spending and revenue generation is increasingly visible. Many companies funded AI expansion with debt, introducing new balance-sheet risks. Debt-funded AI spending is widening the divide between leaders and laggards, pushing investors away from firms where capex growth is not matched by cash flow. This led Meta to shift its focus from open source models to money-making ones.

2. Concentration risk rises as capital crowds into top companies

Beneath the noise is a structural problem: extreme concentration. Investors have crowded into “one dominant stock per sector” in search of safety. Nvidia in semiconductors and Eli Lilly in healthcare are prime examples. While fundamentals remain strong, overcrowding amplifies downside risk due to expensive valuation compared to its peers.

Dubravko Lakos-Bujas of JPMorgan says, “markets are becoming unbalanced, with too much money flowing into just a few popular stocks. When many investors pile into the same names, prices move more sharply." It also makes risk harder to manage, because in stressful periods, heavy selling can quickly push prices down.

2025 was “Trump 1.0 on steroids,” said Keith Lerner, chief investment officer and chief market strategist at Truist Advisory Services Inc., adding that he can’t recall another period when US political decisions triggered this much market volatility.

3. AI’s appetite for power is raising electricity costs

The power bill shock isn’t over. As the US heads into 2026, electricity prices are moving higher. Throughout most of the year, US electricity bills rose faster than overall consumer prices. By September 2025, electricity bills were up 5.1% YoY, compared with a 3% rise in broader consumer inflation.

Retail power rates jumped 7.4% in September 2025, pushing prices to a record 18.1 cents per unit, the steepest increase in nearly two years. With fuel costs climbing and demand staying firm, power bills for homes, transport and businesses are likely to rise further next year.

Electricity demand is rising far faster in Texas and the Mid-Atlantic than the national average. While US power sales are expected to grow about 2.2% annually, Texas demand could jump around 11%, driven by data centres, factories and crypto mining, while PJM demand is set to rise 4% in 2026, led by Northern Virginia.

Data center expansion is the primary driver. Global electricity consumption by data centers is projected to grow 17% through 2026. “AI’s surging power demand growth will be testing grid limits,” says Eduard Sala de Vedruna of S&P Global Energy. Utilities are being forced into large-scale infrastructure upgrades to meet this demand.

4. Diversification beyond mega-cap firms

The mega-cap firms now make up more than half of the S&P 500’s total value, a historic high. However, the market’s spotlight is shifting toward the “enablers” powering the AI boom. Industrial firms and semiconductor supply chains that provide copper, power equipment, cooling systems, and grid hardware are unglamorous but indispensable inputs to the AI and electrification buildout, and many still trade at far more reasonable valuations.

As a result, leadership is expected to rotate toward cyclical and value-oriented sectors. Solita Marcelli of UBS says, "Financials and healthcare are providing a broad foundation as policy uncertainty fades." Mike Wilson of Morgan Stanley adds that investors should favor "industrials and real assets" to capitalize on a "run-it-hot" economy focused on domestic manufacturing.

Semiconductor onshoring is driving a multi-year investment cycle. New US manufacturing plants are coming online, boosting demand for construction and engineering services. The push to make chips at home is driven by national security concerns flagged by the Trump administration. Because these factories are seen as critical infrastructure, spending is likely to continue even if the broader economy slows.

Thanks to these shifts, Michael Wilson of Morgan Stanley expects “market breadth to improve” as leadership shifts toward Financials and Industrials, describing 2026 as an “early-cycle” bull phase for the broader index.

The next phase of returns may favor companies solving physical bottlenecks. Power, cooling, and grid infrastructure providers are gaining attention. Denise Chisholm of Fidelity notes that “rotation and small caps” could outperform as leadership widens. In this environment, diversification is no longer just protection, but a source of opportunity.

The transition from 2025 to 2026 marks the end of the "imagination phase" of the AI bull market and the beginning of the "execution phase." While the previous year was defined by geopolitical plot twists and a narrow chase for mega-cap safety, the coming year will demand a different approach.