Indian equities lag global peers in the near term but could emerge as one of the more compelling long-term equity stories globally: Abakkus Investment Managers Private Limited
According to Abakkus Investment Managers, India’s underperformance is largely sentiment and valuation driven, not economy driven. India's economic fundamentals remain strong with robust growth, healthy forex reserves, improving domestic demand, and policy continuity. However, global investors have shifted capital toward AI-led markets such as the US, Taiwan, and South Korea.
Indian equities have lagged global peers in the near term; it remains one of the attractive long-term equity stories globally. In the 1-year period as of 30th June 2026, though India’s Nifty 50 TRI made a negative return of 0.4%; South Korea’s Kospi, Taiwan’s TAIEX, Japan’s Nikkei and United States’ Nasdaq provided returns of 103.2%, 83.2% and 56.7%, 20.1% respectively. However, in the one-month period, India’s Nifty 50 TRI made a positive return of 2.4%, whereas South Korea’s Kospi registered negative return of 22.2%.
India is expected to gain from AI trade reversal in the medium to long term. FIIs who have recently exited the South Korea market by booking profits, may look at India as an investment case at the time of their fresh investment deployment in over 6-12 months.
Source : Kotak Securities; Bloomberg as on 30th June 2026, Local currency returns ; Absolute terms
Aman Chowhan, Head of Equities - Alternates, Abakkus Investment Managers Private Limited, said “India’s long-term investment case remains firmly intact. While global capital flows are currently being influenced by evolving technology-led opportunities, geopolitical developments and currency movements, the country’s underlying growth drivers including demographics, consumption, formalization and infrastructure creation continue to strengthen. Periods of market underperformance often create the foundation for future opportunities.”
Case for Rupee Strengthening
Case for Rupee Strengthening Currency is a reflection of inflation. The value of products being consumed has become expensive and same in reflecting on dollar purchase. However, according to Abakkus Investment Managers, there is a case of Indian Rupee to recover further against US dollar, as
* Dollar outflows are moderating as dependence on imported energy is gradually reducing
* Lower precious metal imports are easing a key source of dollar demand
* RBI initiatives (FCNR) are supporting stronger foreign currency inflows and improving external liquidity
India offers Broad-Based Sector Representation
According to Abakkus Investment Managers, India’s sectors are more evenly distributed. This reduces dependence on any single sector and supporting diversified market exposure. The Emerging Market Sectoral Weight is observed to be tilted to Information Technology.
Source: Bloomberg and Abakkus Internal Analysis.
AI and Data Centers are the dominant global investment themes.
* Massive investments in artificial intelligence infrastructure, data centers, semiconductors, and advanced computing have attracted global capital
* Companies linked to AI supply chains, including semiconductor and storage providers, have seen exceptional business growth and stock performance
India is currently outside the core AI manufacturing ecosystem.
* Unlike Taiwan and South Korea, India has limited exposure to semiconductor manufacturing and AI hardware
* At the same time, concerns around AI-driven disruption in traditional IT services have weighed on large Indian technology stocks
Foreign Institutional Investors (FIIs) have reduced exposure to India.
* Persistent FII outflows reflect a combination of global capital reallocation, geopolitical uncertainty, tariff concerns, and currency depreciation
Large-cap Indian stocks have lagged despite strong businesses.
* Leading companies in the large cap space have generated limited stock returns over recent years
* The reason is valuation compression rather than deterioration in business fundamentals
Mid- and small-cap segments have significantly outperformed.
* Strong domestic inflows through mutual funds and SIPs have supported select mid- and small-cap stocks
* However, the majority of foreign investors remain concentrated in large-cap indices and have not fully participated in this rally
Geopolitical developments continue to influence investor sentiment.
* US tariff policies, Middle East tensions, India-China relations, and global geopolitical alignments remain important factors influencing capital flows.
Rupee depreciation has affected foreign investor returns.
* While Indian equities delivered modest returns, currency weakness reduced returns in dollar terms, impacting global investor interest.
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