Market Brief: Strategic Rebalancing in Indian Equities The Indian equity market is currently navigating a period of disciplined recalibration. As of February 2026, the **Nifty 50** is trading near **22.6 times** trailing earnings, while market targets for the index sit at approximately **29,000** for the year-end. This represents a projected upside of roughly **11%**, driven primarily by corporate earnings growth rather than valuation expansion. IT Sector: Disciplined Underweight The Information Technology sector remains under pressure due to global revenue deflation and shifting tech expenditure. Expert sentiment from JM Financial Mutual Fund suggests a **slight underweight** position rather than a complete exit. Many large-cap IT entities are now trading at discounts to their **5-year and 10-year** historical benchmarks. While macro headwinds persist, the sector’s solid cash flows provide a safety net, making current price levels unattractive for selling. The strategy focuses on patience as management teams restructure to adapt to the 2026 economic environment. Smallcap Momentum and Recovery Smallcap stocks have emerged as the primary growth engine for the current fiscal year. Recent data shows the smallcap segment leading the market with **22% year-on-year** earnings growth in the most recent quarter. This significantly outpaces the **14%** growth seen in large-caps and **15%** in mid-caps. Following a period of correction where the smallcap index declined roughly **8-9%** in early 2026, valuations have reset to more sustainable levels. The **Nifty Smallcap 250** price-to-earnings multiple has moderated to **26.5**, down from previous highs exceeding **32**. This reset, combined with strong bottom-up earnings momentum, presents a compelling entry window for disciplined stock selection. Macro Indicators and Liquidity The broader domestic economy remains resilient with a **7.4% GDP growth** forecast for FY2026. Monetary policy has turned supportive, with the RBI maintaining a neutral stance after reducing the repo rate to **5.25%**. While Foreign Institutional Investors (FIIs) recorded net outflows of **₹3.1 trillion** year-to-date, domestic liquidity remains a pillar of strength. Monthly SIP inflows have remained steady at approximately **₹294 billion**, providing a consistent cushion against global volatility. Investors are encouraged to prioritize companies with clear earnings visibility over speculative sector rotation, particularly within the rebounding smallcap space.