GQG keeps $24 billion bet on India as ‘perfect storm’ fades, sees banks and infrastructure leading earnings revival
GQG Partners LLC, a New York–based asset manager known for high-conviction emerging-market bets, is maintaining more than $24 billion of exposure to Indian equities even as many foreign investors have trimmed positions after a period of underperformance.
The allocation makes India one of the largest country exposures in GQG’s $166 billion global portfolio. That stance stands out at a time when overseas investors have been persistent sellers. Foreign investors pulled about $19 billion from Indian stocks last year, and the selling trend has extended into 2026, according to market data, pressured by soft corporate earnings, currency weakness and geopolitical tensions.
GQG, however, argues that the headwinds that weighed on Indian equities are easing and that a recovery in earnings—led by financials and infrastructure—could change the narrative.
Why it matters: A sentiment signal in a market driven by flows
Foreign institutional flows remain a major driver of Indian equity performance, often shaping short-term direction and valuations. When large global funds either retreat or double down, domestic investors and other global allocators take note.
India has seen one of its steepest relative underperformances versus emerging-market peers in recent decades during the latest slowdown phase. That has raised questions about valuation premiums, earnings delivery and liquidity support.
GQG’s positioning suggests at least some global investors view the recent weakness as cyclical rather than structural. If similar funds follow, it could stabilize flows into Indian equities, particularly in large-cap sectors with heavy index weights such as banking and telecom.
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What we know so far: From perfect storm to tentative clearing
According to Sudarshan Murthy, a portfolio manager at GQG, Indian equities faced a “perfect storm” in recent quarters. He cited several overlapping pressures:
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Tariff and trade-related worries
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Currency weakness and rupee volatility
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A five-quarter slowdown in corporate earnings growth
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Capital rotating toward markets with stronger artificial-intelligence themes
Murthy said earnings growth, which had cooled, should accelerate back to the mid-teens. He also suggested that the global allocation shift toward AI-centric markets may moderate if valuations there come under scrutiny.
“For every dollar invested in China, we have about nine times that in India,” Murthy said, underscoring GQG’s relative preference.
Separately, a recent trade deal with the United States has helped ease some macro concerns and offered support to the rupee, according to market participants. Brokerages such as Jefferies have also pointed to a higher share of earnings upgrades this season than in previous cycles, though the durability of that trend is still being assessed.
What remains unclear: Whether earnings momentum can sustain
While expectations of an earnings rebound are building, several uncertainties remain:
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It is not yet clear whether upgrades will translate into sustained profit growth or remain sector-specific.
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Global demand conditions, particularly in developed markets, could still influence export-linked sectors.
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Currency stability remains important for foreign investor confidence.
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Flow data for the coming quarters will show whether selling pressure truly moderates.
Market participants note that Indian valuations, even after corrections, remain above many emerging-market peers on some metrics, making delivery on earnings crucial.
Market or sector impact: Banks and infrastructure in focus
GQG’s portfolio positioning offers clues about where it sees opportunity. Filings show exposure to major lenders such as ICICI Bank and State Bank of India, alongside telecom and infrastructure-linked names including Bharti Airtel, Adani Enterprises, Adani Green Energy and JSW Steel.
Murthy said banks could play a leading role in any recovery because of their weight in benchmark indices and improving fundamentals.
Key themes highlighted by GQG:
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Banking: Credit quality remains stable and loan growth has improved. Valuations in some leading banks are viewed as justifiable relative to long-term growth.
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Infrastructure: India’s economic expansion implies sustained demand for roads, power, logistics and urban build-out.
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Energy transition: Renewable capacity additions, particularly in solar and green energy, offer long-duration revenue visibility due to contracted cash flows.
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Telecom: Consolidation and data demand continue to underpin the sector.
According to provisional exchange data, financials and infrastructure names remain among the most actively traded segments in institutional portfolios. Detailed sectoral flow breakdowns for the latest sessions are awaited.
Broader context or background: India’s role in global portfolios
India has increasingly become a core allocation within emerging-market portfolios, supported by demographics, domestic consumption and policy-driven infrastructure spending. Over the past decade, many global funds raised their India weights as supply-chain diversification and geopolitical realignments favored the country.
However, the latest cycle showed that India is not immune to global liquidity shifts. As US rates stayed higher and AI-related themes dominated global markets, capital chased technology-heavy indices elsewhere.
India’s relative underperformance versus MSCI Emerging Markets benchmarks during the earnings slowdown reflected that dynamic. Some strategists say this phase has partly reset expectations, though not necessarily valuations to deep-discount levels.
GQG itself has drawn attention before for contrarian India bets. Its investment in Adani-group companies in 2023—made after a damaging short-seller report—later multiplied in value as shares recovered. That episode boosted its reputation for high-risk, high-conviction calls, even though its broader fund performance ranks closer to the middle of peer groups over five years, according to compiled industry data.
What analysts or officials are saying: Earnings as the anchor
Murthy said GQG’s process centers on assessing earnings growth over a five-year horizon and testing whether valuations align with that trajectory. In that framework, he argued that India offers some of the strongest long-term earnings growth potential globally.
Other market strategists, while not directly commenting on GQG, broadly echo the view that earnings delivery will determine the next leg of the market.
Common themes in analyst commentary include:
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The need for consistent mid-teen earnings growth to justify premiums
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Monitoring asset quality in banks as credit expands
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Execution risks in large infrastructure projects
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Global risk sentiment and dollar liquidity conditions
Analysts also note that domestic institutional investors have partly cushioned foreign outflows in recent years, though overseas flows remain influential for index direction.
What it means for investors or stakeholders: Signals but not guarantees
For institutional and informed retail investors, GQG’s stance is a signal of selective global confidence rather than a blanket endorsement of the market.
Implications include:
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Large-cap banks and infrastructure names may remain core holdings for global funds.
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Earnings upgrades, if sustained, could attract incremental foreign capital.
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Volatility may persist if global risk appetite shifts quickly.
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Sector and stock selection may matter more than broad index exposure.
Investors tracking foreign flows may watch whether other global managers begin to rebuild India exposure after months of caution.
What to watch next: Flows, earnings and macro stability
Key watchpoints in the coming quarters include:
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Foreign portfolio flows: Whether net outflows moderate or reverse.
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Earnings trajectory: Confirmation of a return to mid-teen growth.
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Currency stability: A steadier rupee could support sentiment.
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Global allocation trends: Any rotation away from crowded AI trades.
Until those signals align, market participants say India may trade in a range, supported by domestic growth but sensitive to global liquidity.
For now, GQG’s $24 billion bet underscores a view that the worst of the recent “perfect storm” may be passing. Whether that conviction proves timely will depend less on narratives and more on the hard data of earnings and flows in the months ahead.
