Outlook 2026: Will India Outperform EMs Or Get Hurt By Valuations? Market Expert Eyes A Silver Lining

India has relatively underperformed compared to its emerging market (EM) peers in 2025 after a tumultuous period marked by subdued corporate earnings growth, external geopolitical risks and global tariff pressures. However, market experts are optimistic about the outlook for the new year and betting on India's growth story on strong macroeconomic indicators.

Coming to the EM landscape, Hiren Dasani, Chief Investment Officer (CIO), Emerging Markets at WhiteOak Capital, has a positive view for D-Street, despite India scoring low on artificial intelligence as a market opportunity.

In an exclusive interaction with NDTV Profit, Dasani revealed a silver lining for Indian equities in 2026 after a difficult year. The market expert believes that the argument of India being more expensive than other EMs is no longer valid. He also shared potential opportunities in the global landscape for market investors looking to diversify their portfolios in 2026.

According to Dasani, India had two very strong years of outperformance in 2023 and 2024. Back then, the bigger EMs of Asia such as China and Korea were not performing very well. "India's earnings growth was very strong coming out of COVID-19 and there was lot of buoyancy on strong economic growth."

In contrast, there were some policy-related issues in China back then, as their private sector was not being favored by the Chinese government and for them, their national security was top priority. ''However, those things started to change in the fourth quarter of 2024,'' he claimed.

With that change, two things happened. ''AI-related semiconductor value chain, which is very predominant in Korea and Taiwan, started to perform as globally, investors realised that the entire AI value chain is located in Asia, especially in Korea and Taiwan," explained Dasani.

Secondly, in China, the economic growth was prioritised. The cumulative efforts of stabilising the real estate sector and improving consumption driven by several subsidy programs, started to work for the market.

"A combination of these reasons led to non-India EMs doing well this year. Some of the valuation gap has been bridged. Relative valuations of India are more reasonable today than they were 12 months ago. The argument that India is more expensive than other EMs is no longer valid," he said.

The market expert holds a positive view on Indian market over its ''long-term attractiveness''. Structural factors such as young demographics, consumption driven growth, higher profitability of corporate sector compared to other EMs, continue to make India a relatively attractive market to look at from a longer-term perspective, according to Dasani.

For all global investors, corporate earnings growth is a primary driver of a market. In the last 25-30 years, corporate earnings growth in India have kept pace with the nominal GDP and have broadly risen in double digits.

"So, there's no reason to believe that the same kind of corporate profit growth is not possible. If earnings continue to grow in low double digits, then good market returns should also follow," Dasani told NDTV Profit.

WhiteOak has always been interested in mid and smallcaps as they are a less efficient segment of the market and tend to be more alpha-generating, revealed Dasani. From the sector perspective, consumption, technology, healthcare, and industrials will offer more opportunities during 2026.

Dasani said that outside Indian markets, some themes have worked very well. AI is a top theme that investors cannot get in India. "They need to look at opportunities outside India, especially in Korea and Taiwan for market exposure."

Similarly, from a diversification perspective, Indian investors looking to tap for a higher commodity exposure in gold mining and copper mining, can look at markets outside of India, according to the market veteran.