Indian equity markets are entering a constructive phase in February 2026, characterized by a transition from global underperformance to a potential period of mean reversion. Benchmark indices have shown resilience, with the Nifty 50 sustaining levels around **25,819** and the Sensex trading near **83,734**. Macroeconomic stability serves as a foundational pillar for this outlook. India’s retail inflation for January 2026 moderated to **2.75%** under the newly implemented CPI series. This cooling of price pressures, coupled with a Real GDP growth estimate of **8.2%**, reinforces India’s position as a leading growth economy. The current market environment is increasingly viewed as a contrarian opportunity. Analysts note that India’s relative underperformance against global peers and precious metals has reached a multi-decadal low, hitting the bottom **10th percentile**. Historically, such extremes often precede a cycle of outperformance. Sectoral leadership is shifting toward cyclicals and value-oriented themes. PSU banks have emerged as significant performers, with the State Bank of India recording a YTD return of **16.5%** as of mid-February. Improved asset quality and a **26%** increase in net profits across the public banking sector have bolstered investor confidence. Metals and energy remain key overweight areas. The Nifty Metal index continues to benefit from supply tightness and rising global commodity prices, with Hindustan Copper delivering a YTD return of **15.8%**. Upstream energy companies like Oil India have gained **15.3%** in the first two months of 2026, supported by geopolitical factors and firm crude prices. Institutional activity shows a notable shift in dynamics. While foreign institutional investors (FIIs) have been net sellers in early 2026, domestic institutional investors (DIIs) have acted as a critical cushion, infusing over **₹9,775 crore** in February alone. This domestic liquidity has prevented deep corrections despite global volatility. Largecaps and midcaps are currently preferred over speculative segments. Earnings revisions are reportedly bottoming out after several weak quarters, signaling a potential recovery in corporate profitability for the fiscal year ahead. Technical indicators support this bullish bias, with the Nifty 50 maintaining its position above major moving averages. Market participants are watching the **26,000** level as a psychological hurdle that could trigger the next leg of the rally. Recent trade agreements, including the India-US trade pact and the EU Free Trade Agreement, are viewed as long-term structural wins. These developments, alongside a stabilizing rupee trading near **90.68** against the dollar, provide a favorable backdrop for Indian cyclicals to lead the market recovery.