Our Bureau
Mumbai
Major Wall Street firms including Morgan Stanley, Citigroup, and Goldman Sachs Group Inc. predict a strong recovery for Indian markets in 2026 after a dismal year of underperformance against global peers. Investors are eyeing a potential rotation out of overhyped artificial intelligence stocks, which could funnel foreign capital back into laggards like India, where the MSCI India index has risen just 8.2% this year—trailing emerging market benchmarks by the widest margin since 1993. This shift comes amid stabilizing earnings and policy boosts, signaling early recovery signs.
Indian stocks faced headwinds in 2025, with foreign investors pulling out amid the global AI boom favoring markets in South Korea, Taiwan, China, and the US. The rupee plunged 4.3% to record lows as Asia’s worst performer, while bonds grappled with surging government debt. Yet, GDP surged 8.2% in the September quarter, and top 100 firms posted 12% profit growth, halting earnings downgrades.
Analysts like Angela Lan of State Street Investment Management see a rebound as “increasingly likely,” driven by rate cuts, GST reforms fueling consumption, and credit growth. ING Bank NV flags the rupee’s recovery potential, while PineBridge Investments highlights bonds’ appeal in a stable global backdrop. A cooling AI frenzy could reverse outflows, boosting equities and currency.
