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Happy Diwali 2026! Revisiting My Annual Predictions

Every year, I wish you all a very Happy Diwali and make a set of predictions. Every year, I look closely at what I predicted last year and score them. To prove that there's no real point in predicting. This is the 20th year of this post. I also write about what we've done at Capitalmind, our thoughts towards the future and more.

Deepak Shenoy•

Wish you all a Prosperous, Healthy and Happy Diwali! For the year ahead, I hope your aspirations for health and wealth come true, and you have a wonderful year ahead.

Here's Nihit from our Mutual Fund with our heartfelt wishes:

This is the 20th year of my annual prediction post. I started in 2007, when I mentioned that the US markets are going to collapse, and that came about so radically true in 2008 that I decided I would do it again. The 2008 predictions were horribly wrong. That's when I realized it's useful to not just make predictions, but track the outcomes. In twenty years, I have been wrong as much as I've been right. It's a coin toss. Predictions are what we like to do as humans, but the results aren't very useful. To demonstrate, I had a fantastic score last year, when I got the best prediction right - that RCB would win the IPL - and went on to make more predictions that we will see are ludicrously bad. It's a prediction post that shows you why prediction posts are a bad idea!

First, the Scorecard from 2025

What did I say last year?

India will see a big 20% upmove and hit 30,000 on the Nifty before next Diwali. There will be a layer of insane momentum on the upside and make people question everything they knew about valuations.

What a silly prediction. We got an Iran-Israel-US war. We had crude prices shooting up. We saw a -11% month in April. The Nifty graph shows no momentum at all on the upside. No 30,000 even in sight!

Nifty Chart

While the last few days have been a smart attempt to move up, the entire year has been a disaster, ending about 3% lower than last Diwali.

Score: 0/10.

Gold will crash more than 20% from the peak. Silver, too. (It's a prediction with no meaningful basis. If you're long gold, I hope I'm wrong)

Gold did rise a fair bit after Diwali, but peaked in late Jan 2026, after which it's down about 20%.

Gold Price Chart

Silver prices fell more, about 50% down from it's peak too. But, and this is important, Gold and Silver are still higher than it was last year, in rupee terms. The government did increase the duty on gold by about 9% in May, and that's contributed to reducing the fall, but that's the scene.

Score: 10/10

The US will see a recession and inflation at the same time, hurting their ability to reduce interest rates meaningfully. The recession will cause them to reduce some of the crazy tariffs they have imposed on themselves. But the world will slowly have to deal with the fallout of the China-US trade wars, and there will be some thinking on the alternatives to these two giants.

The US did see higher inflation in 2026, reaching about 4.2% in May and staying about 3% (their target is 2%).

US Inflation

However, there was no recession. GDP growth (real) continues to be 3.4% - a very large number for that massive economy, and the huge investments in AI continue to drive their growth forward.

The US did cut interest rates in October and November last year, and has increased them only a little in September 2026. So that "can't reduce rates" prediction was wrong.

The world has had to deal with things but that was an Iran-Israel war, a massive increase in oil prices, a big damage to shipping worldwide, and attacks by Iran on the Middle East too.

So I'll score myself a 3/10 here.

India will see a lot more investment happen domestically by investors into mutual funds and stocks. Foreign investors will slow down on sales, but by and large become less important for India's growth story. This will result in - and here's the prediction - India's growth hitting 7% next year in real terms (10%+ in nominal terms).

Domestic investment in stocks and mutual funds continues to be strong, with SIP flows hitting 34,000 cr. in September, the highest ever. Foreign investors are less important when they have sold, but their recent turn into being net buyers - only in November - has taken the market up massively.

FIIs have sold nearly 300,000 cr. in 2026, a huge amount, though the impact on the indices has been muted. They didn't "slow down on sales".

India's GDP grew 7.8% in real terms in the March quarter, and 10.3% in nominal terms, so I was right on that one.

Score: 7/10.

The rupee should hit 90 at some point, but will reverse to be in much happier territory by Diwali 2026, around the 80-85 levels. Again, this is probably more hope than logic, but that's what predictions usually are.

It went to 97, LOL!

I was just plain wrong. Too much hope. The USDINR went to around 97, but the reversal in the last few days have brought it back to about 94. There was a massive FCNR move by RBI in July/August 2026 that brought in around $130 bn, and they've managed to somewhat stem the rupee's fall.

USDINR Chart

Score: 0/10

The Scorecard this year: 20/50

Last year, it was 39/50. Even averaged out, it's just above 50%  - which is roughly my long term track record. It's not that I suck at predictions, or that I'm good - it's just not a useful thing to build on predictions like this.

Once a year, I give in to this folly, just so we

Predictions for next year:

  • The recent election results in the US (and Israel) will temper down the enthusiasm for war, and we might see a reduction but not an end to hostilities in the middle east. There is scope for more wars like Cuba and others, which will again keep markets on edge.
  • India will continue to see strong earnings growth of more than 20% in midcaps/smallcaps over the year. Valuations will be company specific - the growth players will continue to see high P/E ratios, but the ones that don't grow will be punished.
  • We will get our momentum year in 2027, when stock prices rise again meaningfully. It seems to have started early in the large caps, but eventually money chases growth and the strong growing players will see strong rises. I don't think it's useful to predict the Nifty, but Midcaps and smallcaps, even as an index, should rise in the coming year. I do the market falling in between as well - we will see large volatility.
  • The US AI trade will blow up. There are going to be bankruptcies, and shotgun mergers and all that. The leverage in that trade will hurt the US (and world) debt markets, and push the US to eventually start cutting rates when faced with this situation, and Japan/Europe will follow.
  • High inflation hits us till mid 2027, till which time we will see rising interest rates. Gold and silver will moderate a little more. Bank credit growth will slow a little from the 18% currently, but it will be strong enough to take GDP nominal growth to about 12%.

What's up at Capitalmind?

We've slowly grown the Capitalmind Mutual Fund in the last year, and now have four funds for you:

  • Flexi Cap fund: This finished a year now, and had beaten the index in a one year time frame by about 1.2%. The video below describes our approach at a quantitative momentum oriented, factor-based approach that uses market regimes to define the investment focus.
  • Multi-Asset Allocation Fund: A fund that invests in equities, fixed income and commodities beyond just Gold and Silver. It's been less than a year here, but do check it out.
  • Arbitrage fund: For tax efficient parking of low volatility funds
  • Liquid fund: This finishes a year in December, and is useful for keeping money that can be used for systematic transfers into our Flexi Cap or Multi-Asset Allocation funds, and for corporates and businesses to park with a low-risk outlook.

Mutual funds are subject to market risks. Please read all scheme related documents carefully.

We will have more funds for you soon, and address the needs for more people with different risk allocations, market approaches and for building long term wealth.

At the Capitalmind PMS, we scaled beyond stocks into mutual funds with four different Mutual Fund investment approaches. We launched Anchor, a Mutual Fund basket for people looking at less aggressive allocations into multiple asset classes. We have All-Weather Equity, a strategy that has now completed four years. India Indices, our MF strategy that just buys ETFs in the different market cap mixes, is over 8 years old with some excess return over the broad indexes.

Here's what we have for you at the PMS (Momentum and Apex India are stock specific strategies not mentioned below):Capitalmind PMS Approaches

We have also revived the Capitalmind Momentum strategy at the PMS. This took a beating last year, but after the change, has come strongly back as momentum started to appear in smaller caps and midcaps. Also, we launched Apex India, which is useful for US-Based NRIs which fights the PFIC tax pain for them.

What We Have Published

We spoke with Sonia Shenoy about the journey of Capitalmind, our research and investment philosophies, and what shapes how we work:

We have written a whole bunch of interesting things for you this year! On twitter, linkedin and other places as well. Check out a few here:

The Capitalmind Podcast went viral, reaching over 170,000 subscribers to our channel! Check out these videos:

And there's so much more coming in the next year.

Warning: I am going to end this post

If you've read this far, I thank you. In the era of TL;DR, I deeply appreciate it, even if you've scrolled down to see the ending.

Every year, we all grow a little older, and hopefully wiser. Every year, we plan to live better, to make wealth, to enjoy ourselves, to beat the struggles that otherwise define us. In all of this, here's my hopes and prayers for all of you to be the best version of you in the days ahead. It's always the small, little things that add up to a great life - eventually, you will connect all the dots looking backward (with due credit to Steve Jobs for the quote). Life is a series of small joys and challenges stitched together in time. The wealth you create will help you create more joys as you go along.

And then Muhammad Ali said, "Don't count the days, make the days count.". That's what I'll leave you with until my next Diwali post: Make the year count.

Earlier Diwali Posts:

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