India's underperformance vs global markets about to end: Seshadri Sen

With a GST 2.0-led demand recovery expected in the Indian economy, Seshadri Sen, head of research and strategist at Emkay Global sees the period of stock markets's underperformance coming to an end

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India's equity markets have lagged global peers in 2025 despite a resilient macro backdrop. Going forward, however, SESHADRI SEN, head of research and strategist at Emkay Global Financial Service expects India's underperformance to end amid GST 2.0-led demand recovery. In an email interview with Nikita Vashisht, he shares the triggers for a turnaround and where the next wave of market leadership may emerge. Edited excerpts:

 

Despite India's strong macro story, equity markets have lagged global peers this year. Why, and what's the road ahead?

India bore the brunt of twin-tightening in FY25 -- both fiscal and monetary impulses were contractionary. As a result, the earnings cycle was considerably weak and the Nifty delivered a weak 3 per cent earnings per share (EPS) growth. Given that India trades at premium valuations of ~20x one-year forward price-earnings (P/E) ratio, the lack of growth support triggered a significant selloff as global investors sought more attractive destinations.

 

We are, now, at the end of this period of underperformance. We expect a strong consumption recovery driven by multiple stimuli: improved welfare spending, significant monetary easing, and now the GST cuts. The earnings cycle is also recovering and we see the possibility of upgrades for FY26/FY27.  

 

Do you think Indian investors should increase their overseas exposure to hedge the sluggishness in domestic equities? How can they do that if MF's overseas investment options have been curtailed?