Indian equities' decade-long outperformance with emerging market narrows

The Indian stock market, which led emerging market (EM) performance for much of the past decade, is now witnessing a phase of relative consolidation with peers such as China and Taiwan staging a strong comeback. 

Analysts, however, said that fiscal and monetary support, along with a rising domestic investor base and strong returns, position the market for renewed momentum.

 

In the past 12 months, the MSCI China has surged 35 per cent, the MSCI EM has advanced 26 per cent, while MSCI India was nearly flat in dollar terms.

 

The latest underperformance comes after strong gains over the past five years.

 

 

Between October 2020 and October 2025, the domestic equities rose 13.7 per cent annually, while the MSCI EM managed to rise just 5 per cent. Meanwhile, between October 2015 and October 2020, the MSCI EM outpaced India with gains of 5.4 per cent versus 3.6 per cent.

 

From a 10-year perspective, the MSCI India index has clocked an annualised gain of 8.6 per cent over the past decade versus 5.9 per cent by the MSCI EM index, according to an analysis by Motilal Oswal.

 

Motilal Oswal’s equity strategists describe the current phase as a period of healthy consolidation amid a broader rotation within emerging markets. With corporate earnings set to recover, valuations normalising, and India’s share in global GDP continuing to rise, the medium-term outlook remains constructive, the brokerage said in its note. It added that supportive fiscal and monetary conditions, a growing domestic investor base, and a robust return on equity relative to EM peers reinforce the potential for renewed momentum.

 

While geopolitical uncertainties and global risk aversion could add near-term volatility, the note emphasised that India’s diversified corporate landscape and structural growth drivers continue to make it a core allocation within EM portfolios.

 

Motilal Oswal attributed India’s decade-long rally to strong economic fundamentals, resilient corporate earnings, and a surge in domestic investor participation. Between 2015 and 2025, India recorded average GDP growth of over 6 per cent-- well above the EM average of about 4 per cent-- and comfortably ahead of China’s 4.5 per cent pace.

 

Aggregate earnings for MSCI India companies grew at a compounded 16 per cent annually during FY22-25 and are projected to rise 11 per cent in FY26 and 16 per cent in FY27, following a muted 2 per cent increase in FY25.

 

Despite moderating from record highs, Indian equities still trade at a valuation premium compared with global peers. As of October 2025, the MSCI India Index was valued at 25.2 times trailing earnings -- around 55 per cent above the EM average of 16.2 times, though below its long-term average premium of 78 per cent.