The country’s equity markets have underperformed significantly versus peers in the past 12 months as factors such as surging oil prices have taken a toll. Is it time, however, for the underlying growth story to win back investors?

Rising energy prices, capital outflows and this year’s all-encompassing focus on AI have proven to be tough for India, but there are signs that this emerging-market powerhouse is winning back admirers.

A country that must import 85 per cent of its oil and gas has been hit as energy prices surged amid Gulf clashes between Iran, neighbouring countries and the US. Foreign institutional investors have pulled as much as $35 billion from India (source: India Capital Growth Fund, November 2026). And Indian stock market benchmarks have lagged global peers, although there are signs that the gap is narrowing. The BSE Sensex has fallen 11 per cent since January, leaving it about 21 percentage points behind the US S&P 500 and 36 percentage points behind Japan’s [index]. Measured in US dollars, the gap is even more pronounced. India got off to a rocky start this year, with the Nifty 50 benchmark opening in the red, while the MSCI Emerging Markets Index rose about 11 per cent.

The AI story has also raised questions about whether India's renowned software services and IT sector might have to rip up business models to adapt. 

“I have never seen the India market underperform in the way that it has,” Gaurav Narain, principal advisor to the London-listed India Capital Growth Fund, managed by Liontrust, said during a media reception in London earlier this week.

On a more positive tack, however, In the week until 6 November the Nifty 50 rose 8.58 per cent, its biggest weekly gain since early 2021. As of yesterday, the Sensex is up 10.5 per cent so far in November.

Slowing earnings momentum and an adjustment after what had been strong post-Covid gains combined with the impact of surging energy prices and related cost pressures to take the shine off the market, Narain said. However, India has a vibrant IPO sector, corporate governance is a positive story and the underlying economy is “doing very well,” Narain said. His firm invests in domestically-focused small and medium-sized enterprises in a well-diversified economy, he said. With India’s main stock index priced at around 16 times earnings, valuations are attractive, he added. Narain said he is confident that India can achieve nominal annual GDP growth of around 10 per cent for some time to come.

Narain is not alone in taking this stance. Eastspring Investments, the $286 billion asset management business of UK-listed Prudential, said in a note this week that it sees “compelling” opportunities in Indian auto-component suppliers benefiting from rising localisation, hospital chains creating value through consolidation, and selected quick-commerce platforms.

“India’s domestic demand remains resilient despite higher food and energy prices weighing on household purchasing power, particularly in the rural areas,” Yuan Yiu Tsai, a Singapore-based portfolio manager, said in the note. “Decades of investments in infrastructure, as well as years of continued formalisation, have broadened the economy’s foundations across industries and income groups, making India’s economic growth less dependent on any single engine.”

“Investors have been concerned around the rising costs from higher interest rates and minimum wage hikes,” he said. Tsai noted that the Reserve Bank of India’s (RBI) shift to “calibrated tightening” suggests a measured rather than aggressive tightening cycle.

MSCI booster
There are reminders of how far India has come as an economy. This week, index provider MSCI added four Indian companies to its MSCI Global Standard Index and increased the weights of 11 other Indian stocks as part of its November index review, boosting India’s weight in the MSCI Emerging Markets Index (sources: Reuters and others, 12 November). MSCI said in a statement that the changes will take effect from 30 November.

MSCI review changes dated 11 November showed that Adani Green Energy, IT company Coforge, Life Insurance Corporation of India and e-commerce company Meesho were added to the index. Their shares rose between 0.5 and 3.4 per cent after the announcement.

Elsewhere, MSCI said the two largest additions to the MSCI World Index, measured by full company market capitalisation, would be Moderna (US) and Aritzia (Canada). The three largest additions to the MSCI Emerging Markets Index, ranked by market capitalisation, will be Zhongji Innolight H shares (China), Life Insurance Corporation of India (India) and Nan Ya Printed Circuit Board Corporation (Taiwan).

UTI International (Singapore) leant into the India narrative yesterday by listing the UTI India Nifty 50 Index ETF on the Singapore Exchange (SGX). As the name implies, the exchange-traded fund tracks the Nifty 50 Total Return Index. It is a feeder fund that invests all of its assets substantially in the UTI Nifty 50 ETF, which is listed in India, managed by UTI AMC and had about $7.5 billion in assets as of 31 October 2026.

The firm is bullish about the country and said the ETF plugs a gap in global portfolios.

“India’s economy has roughly doubled over the past decade, driven largely by domestic consumption, alongside investment in infrastructure, manufacturing and digital services. Its equity market has grown in depth and scale over the same period,” it said.

Putting recent market strains in context, UTI said that over the 25 years to 31 October 2026 the Nifty 50 delivered an annualised return of 12.2 per cent in dollar terms, versus 10.2 per cent for the S&P 500.

“After a period of consolidation, Indian equity valuations now sit below their 10-year averages, and the premium over other emerging markets has narrowed. India is not inexpensive in absolute terms, but relative to its own history, the starting point today is more measured than it has been for some time. For long-term investors, that context matters,” Jermyn Wong, CEO, UTI International (Singapore), said.

A period of underperformance cannot easily be shrugged off, however.

India Capital Growth Fund’s Narain said his portfolio’s focus on small and medium-sized companies, plus the impact of a decade of major infrastructure spending and reform, bodes well for the country. He also argues that India's IT and software sector can adapt to AI, and that contracts for new business remain strong. 

“The opportunity set has magnified for us,” Narain said.