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?
 "Muthoot Finance")
 "Devangshu Datta")
 "S Naren")
 "Rahul Arora, Nirmal Bang")
