The Case for India’s Market Comeback

Indian equities are positioned for a significant recovery in 2026 following their weakest relative performance against emerging markets in three decades. This anticipated turnaround stems from a shift toward aggressive re-inflationary policies, including Reserve Bank of India rate cuts, bank deregulation, and a 1.5 trillion rupee GST reduction aimed at stimulating consumption. While 2025 saw a mid-cycle slowdown and high valuations, current market corrections and structural shifts—such as reduced oil dependency and increased household investment in mutual funds—suggest a transition toward high growth with lower volatility. Key catalysts for this structural re-rating include potential earnings revisions, the February AI summit to address tech innovation gaps, and a pending U.S. trade deal. If real growth surprises to the upside as projected, India’s easing economic stance and fiscal consolidation will likely drive higher price-to-earnings multiples and a major market comeback.