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Below the View on the recent upswing in Indian markets by Hari Shyamsunder, CFA, VP & Senior Institutional Portfolio Manager – India Equities, Templeton Global Investments

“India’s market is domestically driven. Its earnings cycle tracks the domestic economic cycle far more than global tech cycles - IT services has some link to global tech budgets but little else does. That was true before AI and it is true today. So I wouldn’t call India a hedge against the AI trade so much as a market that was never part of it. What has changed is that the rest of the region became a concentrated AI bet which made India’s low correlation visible.

India’s attraction has always been a long-term structural growth story - visibility of that growth and a diversified, dynamic market to express it in. Where India has struggled is when growth slows as it did in late 2024 and much of 2025. That has changed in 2026 with economic momentum translating into earnings. The September quarter looks set to continue this with 20%-plus profit growth looking possible for the broader market on results so far. Earnings estimates have been rising through the year rather than being cut.

On valuations, headline multiples have corrected sharply - the Nifty now trades below its 10-year average forward P/E and MSCI India, in October, was at its lowest forward multiple since 2020. Against EM peers, India’s premium has not corrected on a P/E basis, but on a price-to-book basis it is at a material discount to its historical premium.

What has diluted India’s near-term appeal is high crude, a weak rupee and the availability of high-growth opportunities elsewhere. These should be cyclical rather than structural. The rupee has been more stable over the last five months. If crude softens sustainably and growth faces headwinds elsewhere, the picture could change quickly. With valuations reset and estimates rising, the rally can be sustained as macro headwinds ease. Whether the recent inflows become long-term allocation depends on earnings delivery over the next few quarters.”

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