Indian equities enter 2026 amid fresh record highs, but beneath the headline indices, opportunities are quietly emerging in segments that have seen meaningful correction.

According to Avinash Agarwal, Senior Vice President & Head – Equity at Bandhan Life, the midcap space now offers a compelling risk-reward, especially when valuations are viewed through the lens of growth rather than plain multiples.

Speaking to Kshitij Anand of ETMarkets, Agarwal shares why midcaps look attractive on a PEG basis despite valuation concerns, how rate cuts, reforms and domestic growth could reshape market leadership in 2026, and where investors should tread with caution after the sharp run-up in select themes. Edited Excerpts -
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Q) We have hit fresh record highs in November, with a 10% gain so far this year. How are we placed for 2026?**
A) With earnings growth expected to improve next year and many negative events already factored in, we believe that the markets should do reasonably well in 2026.

While the Nifty has done reasonably well this year, some segments of mid- and small caps have seen meaningful correction. This has made them more attractive to invest in.

We believe 2026 will be much better for the mid- and small-cap segment as the full benefit of rate cuts, GST reforms, and other announcements flows into the economy. Midcaps are also better representatives of the domestic economy compared to large caps.

Despite the prevailing market perception that midcaps are overvalued, we are launching a new midcap fund in early 2026. Our conviction is based on two key pillars.

First, midcaps have historically been the market’s top-performing segment over the long term, making them an essential component for life insurance portfolios.

Second, we believe high-growth midcap companies should be evaluated using the Price/Earnings-to-Growth (PEG) ratio rather than a standard P/E multiple. On a PEG basis, midcaps are currently trading at attractive levels relative to historical averages.

Q) Gold and silver outperformed by a wide margin in 2025. How will precious metals play out in 2026? Any triggers to watch out for?
A) Both gold and silver did well this year due to various reasons. While both benefited from the Fed rate cut, gold also benefited due to purchases made by central banks. Similarly, silver has seen some supply concerns, plus new uses have led to greater demand. While the triggers for further upmove are still present, we believe, given the significant price move this year, the return expectations should be more tempered for 2026.