India is on a path of multi-decadal growth. For investors, domestic and global, greater risk lies in not being overweight on India. After all, India is the world’s greatest investment opportunity. Such views may appear counterintuitive, if not overtly bullish, given the fact that Indian equities have delivered their worst relative performance in 2025 against emerging market peers in nearly three decades, and absolute underperformance has been exacerbated in March 2026 due to the war in the Middle East. However, the two-week ceasefire between the US and Iran has changed the market scenario and led to a recovery.

India’s weight in a key emerging market index has slipped to fourth place behind China, Korea, and Taiwan after briefly being the top weight 18 months ago. Foreign investors’ share of Indian listed equity has fallen to roughly 15%, the lowest in over a decade. The rupee hovers near lifetime nominal lows at around 94 to the dollar.

Nevertheless, this scenario presents an opportunity to accumulate Indian equities. The confluence of compressed valuations, a dollar cycle turning down, trade deals being signed and earnings re-acceleration from deleveraged balance sheets has aligned to a degree not observed since 2003.

Let’s consider valuations. The Nifty 50 trailing P/E has fallen to around 20 whereas the reported 10-year median is around 23. MSCI India’s premium to MSCI EM has compressed from around 2x at the peak to below its long-term average. India Inc’s aggregate debt-to-equity ratio stands at multi-decade lows. Listed PAT-to-GDP at around 4 to 5 per cent remains mid-cycle, below the annualised quarterly peaks of 2007-08 with listed earnings likely to rise structurally.

The earnings cycle is turning with double-digit increases coming back. Working capital cycles have compressed across key sectors. Corporate India’s balance sheet is leaner, less leveraged and more capital-efficient than at any point in its history. Unlike China where earnings per share grew at half the rate as their economy since 2000, Indian growth largely converts into shareholder returns over time.

The dollar cycle provides the macro backdrop. The US real effective exchange rate has exhibited clear peaks: around 1970, 1985, 2002, and now 2025. Each was followed by an around decadal-length dollar decline. Analysing US equity outperformance since 2010 shows that USD strength and multiple expansion accounted for the vast majority of the cumulative gap. Empirical studies reveal that

periods of dollar strength are followed by phases when the US dollar weakens and capital flows return to emerging markets. Therefore, once the current cycle turns, as many indicators suggest, emerging market assets including Indian equities could once again attract renewed global investor interest.

The Hormuz crisis is the catalyst rather than the thesis. Deep backwardation in Brent futures tells us the market expects resolution. For long-term investors, domestic and global, the greater risk lies in not being invested. India’s weight in MSCI ACWI at roughly 2% is structurally underweight relative to an economy that will soon represent a tenth of global output in cost-of-living adjusted terms. The recommendation is to accumulate through a staggered entry over the coming weeks and months. Eighteen months of consolidation have compressed the spring. The coming decade will reveal what was always latent.

All in all, India also stands out among emerging markets because of its diversification. Several major emerging economies are significantly dependent on one sector, for instance, Taiwan or South Korea on semiconductors and memory chips, Brazil on commodities or energy. India, on the contrary, has a more broad-based economic structure encompassing services, manufacturing, consumption, discretionary, technology and financial markets. This diversification makes India a relatively lower-volatility emerging market and boosts its attractiveness for long-term asset allocators.

Having said that, there will obviously be risks such as geopolitical tensions, global economic shocks or unforeseen policy changes. However, when structural tailwinds coupled with cyclical improvement sustainable pathway for growth and returns, the risk of remaining under-invested can sometimes become greater. For domestic investors, the most sensible approach remains disciplined long-term allocation with continuing systematic investments and maintaining diversified portfolios. For global investors, gradually increasing exposure to India can be the way forward.

After a period of consolidation, India’s markets increasingly resemble a coiled spring. As structural growth drivers remain strong and cyclical conditions begin to turn more favourable, the coming decade could prove to be one of the most rewarding phases for investors with a long-term outlook.

(The author is a CFA charterholder, author and Fund Manager- PIPE, Ionic Asset. Views are personal.)