New Delhi, Jan. 3 -- Ajay Menon, MD and CEO of Wealth Management at Motilal Oswal Financial Services Limited (MOFSL), believes the performance of the Indian stock market in 2026 will be driven by earnings rather than valuation. In an interview with Mint, Menon said that large caps appear to be better positioned as the earnings cycle improves, while SMIDs (small and mid-caps) require sharper stock selection due to stretched valuations. Apart from the stock market outlook, Menon shared his views on earnings prospects, the impact of the end of the Russia-Ukraine war, and a delayed India-US trade deal. Edited excerpts:

After a year of consolidation in 2025, Indian equity markets are likely to enter a more constructive phase in 2026, supporte...