Indian equities have endured one of their weakest phases in relative terms in recent memory, lagging emerging-market peers over the past five quarters amid slowing corporate earnings, currency pressure and global capital rotation toward artificial intelligence-driven markets.

Yet, GQG Partners LLC a New York-based asset manager overseeing $166 billion globally is taking a contrarian stance. With over $24 billion allocated to India, the firm is maintaining an overweight position in the country even as foreign portfolio investors pulled roughly $19 billion from Indian equities last year, with outflows continuing into 2026.

Sudarshan Murthy, portfolio manager at GQG, believes the recent slump reflects cyclical headwinds rather than structural weakness. He described the period as a “perfect storm” of tariff uncertainties, rupee depreciation, earnings slowdown and capital diversion to AI-heavy markets.

According to Murthy, the earnings cycle may be nearing an inflection point. Corporate profit growth, which slowed for five consecutive quarters, is expected to recover to the mid-teens. Supporting this outlook are signs of earnings upgrades during the current results season a trend that Jefferies reportedly sees as the strongest in seven years.

A trade agreement with the United States has also helped stabilize the rupee, reducing macro uncertainty. In addition, stretched valuations in global AI-linked stocks may prompt investors to reassess capital allocation toward markets with broader sectoral representation such as India.

Within this backdrop, GQG is positioning itself in sectors that have both earnings visibility and structural tailwinds.

GQG’s disclosed emerging-market portfolio includes ICICI Bank Ltd. (NSE: ICICIBANK) and State Bank of India Ltd. (NSE: SBIN) two lenders with significant weight in the Nifty 50 index.

Murthy argues that banking sector growth has picked up, credit quality remains stable, and even leading banks are trading at valuations that align with long-term growth trajectories. Given financials’ substantial index weight, a revival in banking earnings could materially influence broader market performance.

Beyond banks, GQG holds Bharti Airtel Ltd. (NSE: BHARTIARTL), along with infrastructure-linked names such as Adani Enterprises Ltd. (NSE: ADANIENT), Adani Green Energy Ltd. (NSE: ADANIGREEN) and JSW Steel Ltd. (NSE: JSWSTEEL).

Infrastructure remains a long-duration theme. Murthy pointed to capacity expansion at Adani Green Energy, noting growth from about 11 gigawatts to over 17 gigawatts, with revenue backed largely by long-term contracts providing visibility rarely seen in cyclical sectors.

The significance of GQG’s positioning lies in timing. Foreign institutional investors have been reducing exposure due to earnings fatigue and geopolitical tension with the US. If earnings growth reaccelerates, India could reverse its underperformance quickly, particularly given the depth and liquidity of its financial sector.

India also occupies a unique allocation slot in global portfolios. Murthy noted that for every dollar GQG allocates to China, roughly nine dollars are invested in India. That relative weighting reflects a conviction that India offers superior long-term earnings growth compared to most global peers.

However, GQG’s broader performance record is mixed. The Goldman Sachs GQG Partners International Opportunities Fund ranks in the 56th percentile over five years, underscoring that even high-conviction bets can produce uneven outcomes.

If global flows begin rotating back into India, banks are likely to be primary beneficiaries. Financials account for a significant share of benchmark indices, and improved earnings momentum could support valuation rerating.

Infrastructure and renewable energy names may benefit from continued domestic capex push and policy continuity, particularly if macro stability persists. Telecom could see defensive interest amid global volatility.

At a macro level, a stabilizing rupee and improving earnings cycle could restore India’s premium valuation status within emerging markets.