A story of boom, gloom and doom
Marc Faber, the stock soothsayer who is famous for his ‘Gloom, Boom, Doom’ report, feels that the Indian stock market is not going anywhere in 2026. This view is contradictory to those of the analysts, and brokerage houses that believe that the Sensex, the Bombay Stock Exchange index, may gain more than a quarter by December 2026. As we prepare to step into the new year, there are reasons that can be used by both sides, the bulls and bears, and optimists and pessimists. Like the Indian economy’s ‘Alice in Wonderland’ story, the country stock markets imply another trip down the rabbit hole.
One of Faber’s main concerns revolves around the value of the rupee, and its exchange rate vis-à-vis the dollar. Already, the Indian currency is below Rs90, and has shed several percentage points this year. This is why the investor-predictor claims that Indian equities gave negative returns if one considers their worth in dollars, rather than in rupees. In contrast, a few markets have registered positive returns in dollar terms. Brazil, for example, went up by 5.5 per cent. Indeed, despite the recent rise, the Indian stock market was one of the worst performers among emerging markets, and Asian peers.
Next year may not see any worthwhile changes. There is a growing fear among currency traders that the rupee may dip to Rs100-a-dollar within a year. The efforts by the Reserve Bank of India (RBI) to protect the currency has not yielded results. Despite temporary upward blips, the rupee has continued its free fall. Faber feels that the returns from Indian equities in 2026 in dollar terms, largely due to the state of the rupee, may be marginally positive, or even negative. Hence, he is not enthused about them, as he is not about equities elsewhere, except for a few niche segments.
However, there are several players who think that Faber’s gloom-and-doom tale is a fable. The former experts argue that there is momentum in the Indian economy, as indicated by the GDP growth in the first two quarters, low inflation, adequate space for the RBI to intervene, positive consumer sentiments, and good monsoons that will benefit agriculture. This year (2025) was a bad one for equities, but it is behind us. There will be a re-rating of the stocks, as corporate earnings perk up. Valuations are still high, but are down from their post-Covid peaks. There is bullish steam left.
Another way to see the stock market as either half-full or half-empty glass is to go beyond the overall indices, and look at the entire universe of listed stocks. A media report indicates that the bulk of the hikes in share prices is limited to the stocks that comprise the Sensex and Nifty. If one looks at the top 500 scrips by market cap, more than half are in the negative in 2025. It is not a secular uptrend. Indeed, most of the positive activity is concentrated around the large caps, with problems in midcaps, and small caps.
Of course, the die-hard optimists argue that this is how a new bull run begins. After the post-Covid frenzy, when the Sensex rose from below 30,000 in early 2020 to 85,000 now, the index took a break in 2025. It converged with the growth slowdown in GDP. As valuations have eased, and there is fresh energy and excitement in the economy, the bull run may pick up, and gather speed. This will lead to another mini-bull run in 2026, whose future will be decided by several domestic and external factors, including the India-US trade deal.
What is more immediate, and scarier than the rupee, or the secular nature of the upcoming boom or doom, is the massive exodus of money from the equity market. In the first three days of December 2025, foreign investors withdrew more money than they did in the entire month of November. Over the past two months, according to reports, Indian retail investors have turned sellers to book profits. During 2025, when foreigners largely remained net sellers, the Indians saved the day as they poured in huge sums in mutual funds, which invested in stocks. If the ongoing dual-selling trend continues, it can derail the indices over the next few months.
One of the reasons for the retail sales, apart from profit-booking, is the switch from the secondary to primary market. Suddenly, given the plateauing trends in listed stocks, IPOs (Initial Public Offerings) offer the chances to earn better returns. In the recent past, listing gains have touched 50 per cent and more, even if the stocks have subsequently languished at lower prices. This allows the risk-takers to make 30-50 per cent within a few weeks. Apart from the Indian retail investors, foreigners too have adopted these tactics. They sell in the secondary market, and queue up for the IPOs.
Given these contradictory views, Faber advises investors to stay in cash, i.e., get out of stocks, and invest the money in gold, silver, and platinum. He contends that the dollar returns from the precious metals, and bullion, are higher. For Indians, as the rupee slides against the dollar, and if this trend continues in 2026, the metals offer more attractive propositions. Apart from normal increase in prices, as gold and silver have witnessed in 2025, the returns are higher due to the rupee-dollar exchange rate. It is a double-bonanza.
Clearly, the bullion investment strategy can turn into a lot of bull, if the metal prices come down. As trade disruptions, and accompanying disruptions ease, if the Russia-Ukraine war stalls, and if China and the US agree to a more permanent truce, the yellow metal will lose its lustre. Central banks may ease off buying, as will institutional investors. In such a scenario, buying gold or silver now may be fraught with risks. Of course, if one is already invested in them, it will make sense to buy more, after selling equities.
Evidently, stock investors have two options. Either they take the risks, and push further into equities, but trade regularly, almost daily, based on domestic and global events, to reap some rewards, albeit smaller but regularly. Or they can stay away, take a break, and look at other assets, and investment options. It is almost impossible to time a market, any market. Even the best need to be lucky to achieve it. It may be better to wait-and-watch, and assess the stock market before deciding which way it plans to move.
