India not yet a consensus buy amid oil, tech disruptions: Global brokerages

While India remains a structurally attractive emerging market (EM), global investors are no longer seeing it as an obvious buy. Slower relative growth, elevated oil prices, uncertain earnings visibility, and technology-led disruption are weighing on foreign investment flows, stressed panellists at the Business Standard BFSI Insight Summit 2026 in Mumbai.

Sandeep Bhatia, managing director and head of equity India at Macquarie Capital, said that India’s position in the emerging market pecking order has weakened in terms of investor flows during a session on 'Analysing markets through the global lens', moderated by Puneet Wadhwa.

He said these flows did not necessarily change India’s structural position permanently, pointing to developments in other emerging markets, including Indonesia, China and Brazil. However, a correction in the technology-led rally in Western markets could prompt global investors to reassess India.

“When this entire AI tech-driven euphoria, which is happening in the Western markets, sees a correction, there would definitely be a re-evaluation of the Indian market,” he said.

The relative attractiveness of Indian equities has diminished as growth and earnings prospects in developed markets strengthened, according to Gautam Chhaochharia, head of global markets, India, at UBS. He said sustained foreign institutional investor (FII) inflows would require an improvement in India’s relative growth outlook and a reduction in macroeconomic risks.

Globally, investors are also increasingly comparing India’s investment opportunities with technology-led developments in other markets, raising questions about the appeal of Indian large-cap companies focused on traditional businesses.

Venugopal Garre, managing director at Bernstein, said the challenge extends beyond artificial intelligence (AI), as technology is increasingly capable of disrupting businesses across sectors. “The reality is that technology disruption, which is essentially happening, is not just isolated to AI as a technology. It’s about AI as a technology going to disrupt a lot of things in every sector,” he said.

According to Garre, global investors are looking for businesses with the potential to become future multibaggers, develop export opportunities and benefit from emerging technologies. Traditional businesses, he said, needed to demonstrate sufficiently strong growth to compete for that capital.

“My problem simply today is that foreign investors, when they look at opportunities, they will say, ‘What is the point of investing in a traditional, old-school end market unless there is massive growth which forces me to invest? Let me look for opportunities which can be future multi-baggers, big stories, export stories,” Garre said.

He also said that Indian large-cap companies needed to take greater responsibility for investing in future technologies rather than waiting for government policy support.

Chhaochharia said the outlook for Indian IT services companies remained uncertain from an investor’s perspective, despite the opportunities created by the adoption of AI. He said investors were looking beyond the immediate earnings outlook and assessing whether the sector could return to sustained double-digit earnings growth over the next three to five years.

“Indian IT services is still evolving in the AI world. There is an opportunity as global businesses implement AI, which is a complex task,” Chhaochharia said. However, he said investors did not yet have sufficient visibility on a sustained recovery in earnings growth.

IT index valuations have declined, but are not sufficiently attractive relative to global IT services companies or the broader Indian market.

On India Inc’s earnings outlook beyond IT, Chhaochharia was more optimistic. He said nominal gross domestic product growth, despite the headwinds facing the economy, remained around double digits, making double-digit corporate earnings growth a reasonable expectation.

He said the more important question for investors was whether earnings growth could reach 18-20 per cent, rather than 10-14 per cent, which he said should be reasonably achievable over the longer term.

Apart from earnings growth, lower oil prices, reduced pressure on the Reserve Bank of India (RBI) from capital outflows and some moderation in developed-market growth are factors that could improve India’s relative attractiveness, according to Chhaochharia.

Oil, according to him, is more important than US Treasury yields as a near-term driver of sentiment and foreign investment flows into India, although US rates remained important for longer-term investors. Higher US interest rates had raised the return threshold Indian equities need to meet in dollar terms.

Sanjay Mookim, head of India equity research at JP Morgan, also highlighted the impact of higher crude prices on India’s external balances and currency.

He said every $10 increase in crude oil prices, sustained over a year, increased India’s current account deficit by about $15 billion. 

Mookim said the combination of foreign capital outflows, pressure on the rupee and hedging activity could compound the challenges facing the Indian market. Persistently high oil prices would also weigh on domestic growth by increasing the cost of energy imports and leaving less money available for consumption and expansion, he said.

The panellists offered differing assessments of opportunities in Indian equities, with caution over the broader market outlook alongside selective areas of interest.

Garre said his latest assessment pointed to some positive returns for the Nifty by the end of the year through mean reversion, but he did not expect investors to become overly enthusiastic about the market.

“I am still not in the camp of get too excited and buy,” he said.

Bhatia advised caution on small- and mid-cap stocks, saying more pain could lie ahead in those segments. He identified Indian large-cap banks as attractive and said investors with a horizon of more than two years could begin looking selectively at Indian IT stocks, provided they were willing to be patient.

Mookim said large-cap Indian equities could offer value over a longer investment horizon, while cautioning that investors should not expect multibagger returns or 20 per cent compounding from large-cap stocks.