The turn: from crowded AI to earnings-led India
Through the year's initial nine months, heavy positioning in AI-focused trades dragged on Indian equities, but the subsequent unwind has renewed interest in India. The MSCI India index has risen 11% off an October low, swelling market value by more than $400 billion and nearly erasing the year-to-date drop in a $5.4 trillion market.
Managers say India's lighter AI footprint is now an advantage as investors diversify away from volatile tech bets into markets with solid profit growth. "We've become more positive on India and have added back to our exposure in recent weeks," said Tan Altundag, who oversees emerging equities for Pictet Asset Management in Hong Kong. He cited a better balance among macro risks, flows and valuations, and said shifting away from the choppy AI trade should help India.
Flows, positioning and profits
The rebound has been fueled by returning foreign buyers. In November, foreigners bought a net $8.5 billion, putting the month on track to be the strongest monthly intake in six years and leaving the year's aggregate outflow near $22 billion. Even so, active long-only funds globally are still $74 billion underweight India versus their benchmarks, near the lightest stance since 2015, leaving scope for more buying if sentiment keeps improving.
Earnings momentum is part of the pitch. Bank of America expects Nifty 50 companies' profits to climb about 18% year over year in the September quarter, up from 13% in the three months before. That is one reason US-based Calamos Investments has been adding. Co-chief investment officer Nick Niziolek said the firm's emerging-market strategy lifted its India slice to above 10% over the last three to four months, up from roughly 1% to 2% about a year earlier, pointing to an earnings inflection, better fundamentals and appealing valuations.
Oil, valuations and the holdouts
Cheaper crude is another boost for a country that brings in close to 90% of its energy. "I'm comfortable on India while Brent sits around $100 a barrel or below," said Lauren Hyslop, an investment manager with UK-based Mattioli Woods.
Valuations no longer look stretched. The MSCI India gauge trades around 20 times next year's earnings, below its five-year average, according to Bloomberg-compiled data. Long-term buyers are leaning in: "As long-term investors, we remain constructive on the outlook for India," said Nikhil Rastogi, portfolio manager at Chicago-based Kabouter Management LLC, adding that some previously pricey areas now look more reasonable. And as the AI trade unwinds, "we've seen buying interest coming back for India," said Simon Sidmalm, a fund manager with Tundra Fonder AB in Stockholm, who is sticking with value names he sees upside in.
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Not everyone is rushing. Nick Price, an emerging-market portfolio manager with Fidelity in Hong Kong, said, "We have reduced some underweight on India over the past few weeks by trimming some AI-related stocks." He said his India exposure could rise gradually, particularly via financials, but it remains underweight for now.
The market scorecard and why it matters
Despite the bounce, India is still lagging for the year. MSCI India is down 2.2% in 2026, while the regional benchmark is up about 12%, which would mark back-to-back years of India trailing its regional peer, something not seen since 2020. Even so, the combination of returning foreign flows, faster profit growth and lower oil is drawing global funds back toward what could be a turning point for emerging markets more broadly.
The bottom line: India is reappearing on buy lists as an earnings story rather than an AI proxy. If you own EM or are weighing exposure, watch whether underweight managers keep closing the gap, how Nifty 50 earnings land, and whether oil stays tame.
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