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Equirus Wealth, one of India's fastest-growing wealth management firms managing over ?35,000 crore in assets among the country's top 10 non-bank wealth managers, today released a landmark report titled: “India in the Reflationary Cycle: Navigating Selective Growth in a Low-Inflation World” 

The report highlights that global markets are entering a reflationary phase, with India emerging as a key beneficiary within Emerging Markets supported by policy-led growth, easing liquidity conditions and early signs of a weakening US dollar.

As global investors reassess concentrated exposure to the US AI trade and seek diversification across Asia. Despite India witnessing foreign institutional investor (FII) outflows of nearly USD 18 billion in 2025, Equirus Wealth believes the current underweight positioning limits further downside and sets the stage for selective inflows if EM sentiment improves.

The analysis also projects India to contribute over 15% of global incremental GDP growth between 2025-2030, surpassing the combined contribution of Japan and Germany.

Unlike past reflationary cycles characterised by excess liquidity or overheating inflation, the current phase is defined by structural disinflation and targeted policy support. As a result, asset allocation decisions are becoming more selective. Equities are regaining relative appeal over cash and defensives, but returns are increasingly driven by earnings durability and balance-sheet strength rather than valuation expansion. Fixed income remains supported by lower-for-longer rate expectations, while gold continues to play a role as a structural hedge amid geopolitical and currency 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

Emerging Market Concentration Creates India Opportunity:

Within Emerging Markets, the report highlights increasing structural divergence. Nearly 75% of the MSCI Emerging Markets index is concentrated in just four markets—China, India, Korea and Taiwan. Of these, all except India have been major beneficiaries of the global AI-led technology cycle. As global investors reassess concentration risks and valuation excesses in narrow themes, India’s broader, domestically driven earnings profile improves its relative appeal.

FII Positioning Reset Creates Upside Potential:

Foreign investor participation in Indian equities has remained subdued, with net FII outflows of approximately USD 18 billion in 2025, the report noted. While this reflected concerns around valuations, earnings momentum, and India’s limited participation in the AI trade, it has also resulted in a meaningful reset in global positioning. India is no longer a crowded trade within EM portfolios, reducing downside risks and creating scope for incremental reallocation as 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  CIO -Equirus Family Office, as cited in the report.

Policy-Led Growth Tailwinds:

At the macro level, the report emphasises 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—continues to cap nominal GDP growth, which is expected to remain below 10%. While equity markets and GDP growth do not always move in tandem in the short term, over full cycles, equity returns have historically aligned closely with nominal GDP growth, the report noted.

Reflationary Signals Beyond India:

As a result, while the reflationary phase is constructive for Indian risk assets, return expectations need to be recalibrated. The coming cycle is likely to reward earnings delivery, consistency, and balance-sheet strength, rather than momentum-driven gains or multiple expansion.

Key Investment Themes

 * Fixed Income: Equirus favors the 4-7 year government bond segment, particularly SDLs, as the RBI maintains accommodative policy. The 10-year yield remains stuck around 6.60%, a full 135 basis points over the repo rate, offering compelling opportunities.

* Precious Metals: Gold continues to be positioned as a long-term portfolio hedge, supported by central bank buying, geopolitical risks and declining trust in fiat currencies, while silver is viewed as a tactical, high-volatility trade.

* India to Benefit from Cooling AI Trade Concentration: With nearly 75% of MSCI EM driven by four markets—China, India, Korea and Taiwan—excluding India from the AI rally, any rotation away from crowded AI themes could disproportionately benefit India.

* Corporate Earnings: Based on analysis of 3,200 listed companies, FY27 sales and profit after tax (PAT) growth are expected to accelerate. Interest coverage ratios reached peak levels for the third consecutive quarter in 2QFY26.

In conclusion, the Equirus report states that as global markets transition into a reflationary regime, India is well positioned to benefit as a relative outperformer within Emerging Markets. With strong real growth, supportive policy conditions, and light global investor positioning, India offers a combination of stability and participation as global allocations broaden—albeit with returns firmly anchored in earnings and nominal growth realities. The coming cycle is likely to reward earnings delivery, consistency, and balance-sheet strength, rather than momentum-driven gains or multiple expansion. With expansionary fiscal and monetary policies, India is entering a reflationary phase that is positive for risk assets," concluded Equirus. "However, return expectations need to be recalibrated given the low inflation and sub-10% nominal GDP growth environment.

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