Sensex, Nifty in 2026: Stocks likely to give double-digit returns; check 6 'pure-play penetration sectors'

The report stated that while challenges remain, HSBC believes some of this underperformance will unwind in 2026.

"Significant initiatives by the government to revive consumption (tax cuts (personal and GST), interest rate cuts, trading restrictions, etc.) and a likely more favourable regulatory regime should help India deliver a double-digit return in 2026," the report, authored by Yogesh Aggarwal, Head of Research, India, HSBC Securities and Capital Markets, added.

Sectors to watch out for

The analysts note that they expect a recovery (even if modest) in IT demand, domestic consumer demand and credit off-take in 2026. Cement consolidation may push up prices, while the oil and gas sector may benefit from more gas supply and lower crude prices.

"We like the property sector as Indians upgrade to bigger homes. Insurance and hospitals remain attractive sectors," they said.

What HSBC said on 'AI revolution' in India

The report highlighted that global AI exuberance is solid; however, it seems India, at this stage, is at a distinct disadvantage in the AI ‘revolution’.

"Throughout 2025, in our interactions with global investors, we saw India being positioned as a global AI alternative play. Though in the past few weeks, there has been some unwinding of this theme," HSBC notes.

Indian IT sector: What is the outlook?

The report added that growth and hiring have slowed in the IT sector, which remains the top white-collar job sector in the country. They expect an 8-10% negative impact on revenue in Indian IT due to the adoption of AI tools across the technology stack over 3-4 years, although AI could be accretive to growth in the medium to long term.

Top cloud companies are likely to spend $2 trillion in AI infrastructure over the next 4-5 years, which could generate downstream IT services opportunities.

India – A ‘penetration’ story?

The report said that the 'penetration story' is a loosely used term in India, and a finer distinction is warranted.

"We believe most companies (consumer and financial) and even export sectors like IT can be grouped into three broad categories: pure-play penetration companies, market expansion companies, and then mature industries."

Pure-play penetration sectors

Pure-play penetration stories are where companies/sectors are gaining share from existing companies/sectors (most of the time from the unorganised channel) or where there is higher demand than supply.

• Quick commerce (QC) is a penetration theme where companies like Blinkit and Instamart are gaining share from traditional mom-and-pop stores (unorganised Kirana stores). These companies are growing at 100%-plus growth rates, much higher than the underlying market growth of around 10%.
• A similar example of a penetration story is Titan. The total jewellery market in India is around $75 billion, and Titan’s market share is still only 9-10%. Formalisation of this industry and consumer attraction to genuine and reliable jewellers who can provide innovative designs are leading to Titan (Tanishq) gaining share in the industry from, again, unorganised players.
• Mutual funds or wealth management are likely to fall in this category as well. Still, less than 10% of India’s households' (HH) financial savings are in the market, and, therefore, the stock market can continue to attract a higher share of household savings.
• Hospitals in India are a strong penetration story, with only 0.7 beds per 1,000 people versus the global average of 1.6. While affordability limits true penetration, high utilisation and rising realisations indicate clear, unmet demand for capacity. As care shifts from low-quality centres to large hospital chains, the sector is positioned for sustained mid- to high-teen growth.
• Listed real estate in India shows high growth and falls into this category, as the bulk of the sales of listed real estate companies is actually from upgrade demand and not from first-time buyers. Companies have benefited from higher volumes, house sizes and realisations per square foot.

High-end shopping mall operators like Phoenix Mills fall into the same category. Phoenix Mills can continue to offer higher value-added services at its existing malls to attract higher footfall and also add new properties in new cities.

• Term insurance is another clear penetration story, driven by rising consumer awareness and OEM push. Although India has around 330 million life insurance policies—implying healthy household penetration—the share of retail protection remains low at ~3% of retail life insurance APE. This is expected to rise to about 7.5% over the next five years.