India: The Emerging Market Exception

Institute of Managed Accounts Professionals

5 May 2026

After more than a decade of disappointment, emerging market equities are attracting renewed interest – and India stands out as the most compelling story of all.

Emerging markets have underperformed the S&P 500 in 13 of the past 15 years, weighed down by U.S. mega-cap dominance, a strong dollar, and structural headwinds in China. The result has been deeply entrenched home bias among developed-market investors. But the environment is shifting. U.S. equities now trade at historically elevated valuations, concentrated in a narrow group of names. The dollar has softened, the Federal Reserve has turned dovish, and China has shown signs of stabilisation. Against this backdrop, emerging markets – trading at a 45 per cent valuation discount to the S&P 500 – are beginning to look attractive again.

Malcolm Dorson, Head of the Active Investment Team and Senior Portfolio Manager for Emerging Market Equities at Global X, made the case for India at the 2026 IMAP Portfolio Management Conference in Sydney. His argument was straightforward: India is not a typical cyclical emerging market. It is a structural growth story underpinned by demographics, policy reform, digital transformation, and supply chain realignment – and it deserves a dedicated allocation.

The demographic dividend

India now has the world’s largest population at over 1.4 billion, having surpassed China, with nearly 60 per cent of citizens under 35. Its youth literacy rate sits at approximately 97 per cent, and it is on track to produce the world’s second largest pool of university and STEM graduates. Dorson describes India as “the best global demographic story,” noting that its Gen Z cohort of 377 million is expected to account for 46 per cent of Indian consumer spending – equivalent to US$1.8 trillion – by 2035. This is a consumption engine still in its early stages.

Structural reform momentum

India’s reform track record has meaningfully improved the business environment. The United Payments Interface (UPI) has digitalised transactions at scale; the Aadhaar program has formally identified over 94 per cent of the population, enabling access to financial services and government subsidies; and the Goods and Services Tax has streamlined interstate commerce. The government’s “Make in India” initiative is actively building manufacturing capacity, attracting foreign investment, and reducing reliance on Chinese imports. Corporate tax cuts, production-linked incentive schemes, and infrastructure spending round out a reform agenda that Dorson characterises as fiscally responsible – partly because digitisation has expanded the tax base following removal of 80 per cent of paper currency in 2016.

Supply chain beneficiary

As global companies seek to reduce their exposure to China, India is a natural beneficiary of nearshoring trends. Foreign direct investment inflows have grown from US$36 billion in FY2013-14 to over US$80 billion in FY2024-25. India has recently signed free trade agreements with the UK, New Zealand, Oman, and the European Union – the EU deal alone will cut tariffs on approximately 99.5 per cent of Indian exports – and discussions with the United States are progressing constructively.

A digital economy coming of age

India’s Digital India Program, launched in 2015, has expanded new-economy sectors from around 5 per cent to 15 per cent of GDP. The country handles 49 per cent of global real-time transactions and hosts the world’s third largest startup ecosystem, with over 123,000 startups and 127 unicorns valued at more than US$390 billion combined. With over 500 million consumers, India is projected to become the world’s second largest cohort of online shoppers by 2030.

The investment case

India’s market capitalisation already exceeds US$5 trillion, making it the fifth largest stock market globally. Its beta to emerging markets has declined from roughly 0.8 to around 0.5 since 2020, reflecting improved macro stability and reduced dependence on foreign capital flows – characteristics that distinguish it from more volatile peers. GDP is expected to surpass US$6 trillion by 2030, potentially making India the world’s third largest economy, and its weighting in the MSCI Emerging Markets Index could rise above 25 per cent (from around 15.3 per cent today).

For investors seeking growth, diversification, and lower correlation to U.S. markets, India merits serious consideration. The structural tailwinds are genuine, the policy environment is supportive, and the valuation entry point remains attractive.

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