Ashmore Group Predicts Strong Turnaround for Indian Equities in 2026

Specialist emerging market asset manager Ashmore Group, with $48.7 billion under management, is placing a significant bet on Indian equities experiencing a turnaround in 2026. Following a cyclical slowdown in the previous year, the firm's research indicates a more positive macroeconomic outlook for India.

Positive Economic Indicators

• Ashmore Group's Head of Research, Gustavo Medeiros, highlighted in a 2026 market outlook report that India's macroeconomic indicators are increasingly favourable.
• Key improvements include rising credit demand, renewed investment activity, and an expectation of further interest rate cuts in 2026, all while inflation is projected to remain contained.
• This optimistic view is supported by India's strong economic performance, with its Gross Domestic Product (GDP) growing at an impressive 8.2 per cent during the July-September period of fiscal 2025-26 (FY26).
• The manufacturing sector was a significant driver of this growth, expanding by 9.1 per cent during the quarter.

Potential Challenges and Valuations

• Medeiros cautioned that India might still face temporary headwinds, primarily from large global fund managers potentially reducing their underweight positions in China, which could divert funds away from India.
• However, he added that Indian markets are nearing a point where their valuations will become attractive, potentially regaining Ashmore's preference among the largest Emerging Market (EM) equity markets.

Broader Emerging Market Trends

• Ashmore Group believes the growth momentum in emerging markets is broadening across Asia, Latin America, Eastern Europe, and Africa.
• This trend is attributed to structural reforms, policy adjustments, and resilient economic performance, which are enhancing macro stability, leading to sovereign rating upgrades and encouraging renewed investor inflows.
• Latin America, in particular, is seeing a wave of market-friendly governments, which is expected to lower risk premia and boost investment.
• The firm anticipates continued EM outperformance in 2026, driven by resilient economic performance, attractive local market valuations, and favourable technical factors.

Global Economic Landscape

• Regarding global policy, the peak risk of US tariffs appears to be receding.
• Emerging narratives around an accelerating AI capital expenditure super-cycle and China's renewed export-led development strategy are shaping the global financial landscape for 2026.
• These forces are expected to help ease global price pressures, introduce disinflationary supply into markets, and provide central banks with more room to cut interest rates.
• Combined with a re-evaluation of "US exceptionalism" and a softening US dollar, global financial conditions are expected to remain accommodative, favouring EM outperformance.

Impact

• This news suggests a potentially positive outlook for Indian equities, which could lead to increased foreign investment and higher stock prices across various sectors.
• It indicates a shift in global investor sentiment towards emerging markets, with India being a key beneficiary.
• Indian companies, especially those in export-oriented or manufacturing sectors, may see improved valuations and investor interest.
• Impact Rating: 7/10

Difficult Terms Explained

• Emerging Market (EM): Countries undergoing rapid growth and industrialization, transitioning from developing to developed status.
• Gross Domestic Product (GDP): The total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.
• Sovereign Rating: An assessment of the creditworthiness of a national government, indicating its ability to repay its debts.
• Disinflationary Supply: An increase in the supply of goods and services that puts downward pressure on prices without necessarily causing deflation (falling prices).
• Accommodative Financial Conditions: A monetary policy environment where borrowing is cheap and credit is readily available, encouraging spending and investment.