India's stock market has underperformed its Asian counterparts over the past six months, a trend analysts at ICICI Direct attribute to trade policy uncertainties, particularly the steep 50% tariffs imposed by India on the US and the ongoing deadlock in a bilateral trade deal. In its Quant Yearly Outlook for 2026, the brokerage firm argues that clarity on trade, not just domestic growth, is the dominant driver for equity returns in the region.
The Missing Catalyst: A US-India Trade Resolution
The report highlights that the performance gap with Asian peers underscores a critical point. Trade policy clarity has been a more significant factor than domestic growth alone. ICICI Direct believes a resolution to the US-India trade negotiations is the missing catalyst that could unlock India's relative re-rating. The brokerage sets a Nifty target of 29,200 for the calendar year 2026, contingent on this development.
Furthermore, the end of US quantitative tightening and the beginning of rate cuts could reverse the trend of Foreign Portfolio Investor (FPI) outflows. The report suggests that improving global liquidity and a weaker US dollar may revive FPI inflows into India by late 2025 or early 2026.
ICICI Direct analyst Jay Thakkar noted that FPI capital has favoured AI-driven economies recently, contributing to India's underperformance. However, he pointed out that stretched valuations in the AI sector could trigger a correction. "A 'fizzle' in AI enthusiasm would likely initiate a major rotation of capital globally; India is well-positioned for this reversal," Thakkar opined. The brokerage defines Nifty's risk-reward range for the next year between 24,200 and 29,200.
Five Long-Term Stock Picks for 2026
Based on its quantitative analysis, ICICI Direct has identified five stocks for long-term investment. Its top quant picks for 2026 are Bank of India, Marico, UltraTech Cement, TCS, and Sun Pharma.
Bank of India
The brokerage recommends buying Bank of India in the range of ₹132-140, with a target price of ₹180 and a stop loss at ₹115. It notes that the recent decline in the stock's price is due to profit-booking after a strong rally, presenting a fresh entry opportunity. With the PSU Bank index gaining nearly 25% in CY25 so far, ICICI Direct expects this outperformance to continue, with Bank of India leading the pack.
Marico
For Marico, the buy range is ₹710-740, with a target of ₹880 and a stop loss of ₹638. The firm highlights that Marico's stock has shown resilience during market weakness, with additions in long positions rather than short build-up. After consolidating for months, the stock is expected to move higher towards ₹860.
Sun Pharma
ICICI Direct suggests buying Sun Pharma between ₹1750-1790, targeting ₹2180, with a stop loss at ₹1540. While the pharma sector has underperformed, early signs of a reversal are visible. The brokerage believes Sun Pharma, as a sector heavyweight, will be a major gainer if FII flows resume, given the low leverage in the stock indicating no major short build-up.
Tata Consultancy Services (TCS)
The buy range for TCS is ₹3120-3220, with a target price of ₹3775 and a stop loss at ₹2840. The technology sector witnessed significant FII selloff last year. ICICI Direct believes a reversal in FII flows will see stocks like TCS take the lead, potentially moving towards ₹3900. The increasing open interest suggests short additions, and momentum is expected from short covering.
UltraTech Cement
For UltraTech Cement, the recommended buy zone is ₹11200-11700, with a target of ₹14500 and a stop loss of ₹9970. The cement sector has underperformed the Nifty, but selling pressure from FIIs was relatively lower. The brokerage expects the stock, a Nifty constituent, to outperform peers as FII flows return, with fresh long additions likely to push it toward life highs.
Disclaimer: This article is for educational purposes only. The views and recommendations are those of the brokerage firm and analysts, not Mint. Investors are advised to consult certified experts before making any investment decisions, as market conditions are subject to rapid change.
