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Equirus Wealth reports India as a standout among emerging markets, driven by policy-led growth, resilient GDP, and potential for higher global investment amid a reflationary cycle.
Nearly 75% of the MSCI Emerging Markets index is concentrated in just four markets — China, India, South Korea and Taiwan.
India is emerging as a relatively bright spot among emerging markets as global financial markets move into a reflationary phase marked by low inflation and selective growth, according to a new report released by Equirus Wealth on Friday.
In its report titled ‘India in the Reflationary Cycle: Navigating Selective Growth in a Low-Inflation World’, Equirus Wealth said global investors are reassessing concentrated exposure to narrow themes such as the US-led artificial intelligence trade, opening up opportunities for diversification across Asia. Within this shift, India stands out due to policy-led growth, easing liquidity conditions and early indications of a weakening US dollar.
The report highlighted that nearly 75% of the MSCI Emerging Markets index is concentrated in just four markets — China, India, South Korea and Taiwan. However, unlike the others, India has not been a major beneficiary of the global AI-driven technology rally. This divergence, Equirus said, improves India’s relative appeal as investors look to rebalance away from crowded trades and valuation-heavy segments.
Despite foreign institutional investor (FII) outflows of nearly $18 billion from Indian equities in 2025, Equirus Wealth believes the downside risks are now limited. The firm noted that global positioning in India has reset meaningfully, reducing the risk of further heavy selling and creating room for selective inflows if emerging market sentiment improves.
“India’s opportunity in 2026 is as much about positioning as it is about growth. After a prolonged period of FII outflows, global investors are no longer overweight India. That reset creates room for incremental flows as global equity leadership broadens beyond narrow AI-driven trades,” said Chanchal Agarwal, Chief Investment Officer at Equirus Family Office, as cited in the report.
Equirus Wealth also projected that India would account for more than 15% of global incremental GDP growth between 2025 and 2030, exceeding the combined contribution of Japan and Germany. This, the report said, reinforces India’s importance as a long-term growth engine within the global economy.
Unlike previous reflationary cycles driven by excess liquidity or high inflation, the current phase is characterised by structural disinflation and targeted policy support. As a result, asset allocation decisions are becoming more selective. Equities are regaining attractiveness relative to cash and defensives, but returns are increasingly dependent on earnings durability and balance-sheet strength rather than valuation expansion. Fixed income continues to benefit from “lower-for-longer” interest rate expectations, while gold remains a structural hedge amid geopolitical and currency-related uncertainty.
“We are entering a reflationary phase, but this cycle is very different from past risk-on environments. It is not about excess liquidity, but about policy-led support for growth in a low-inflation world. In such a regime, asset allocation becomes more selective, and India benefits from the combination of strong real growth and macro stability,” said Mitesh Shah, CEO, Equirus Family Office.
On the macro front, the report noted that India’s real GDP growth remains resilient, supported by expansionary fiscal policy, improving domestic demand and an accommodative monetary stance. However, persistently low inflation — both domestic and imported — is expected to keep nominal GDP growth below 10%. Over full market cycles, equity returns tend to align more closely with nominal GDP growth rather than short-term fluctuations, the report added.
In terms of investment preferences, Equirus favours the four-to-seven-year government bond segment, particularly state development loans, citing attractive spreads with the 10-year yield hovering around 6.60%. Gold continues to be positioned as a long-term portfolio hedge, while silver is viewed as a tactical, high-volatility opportunity.
The report also pointed to improving corporate fundamentals. Based on an analysis of around 3,200 listed companies, Equirus expects FY27 sales and profit after tax growth to accelerate, with interest coverage ratios reaching peak levels for the third consecutive quarter in the September quarter of FY26.
In conclusion, Equirus Wealth said India is well placed to outperform within emerging markets as global allocations broaden beyond concentrated AI-driven themes. With strong real growth, supportive policy conditions and relatively light global investor positioning, India offers a balance of stability and participation in the evolving reflationary cycle, though returns are likely to remain anchored in earnings delivery and nominal growth rather than momentum-led gains.
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January 16, 2026, 15:15 IST
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