India Not Yet a Consensus Buy Amid Oil and Tech Disruptions

Foreign Investors Reassess India’s Growth and Risk Premium

India remains a structurally attractive market, but oil exposure, earnings uncertainty and technology disruption are complicating the case for fresh global capital.

India’s appeal is increasingly relative

India has not lost its structural standing as an emerging market, but it is no longer an automatic choice for global investors, panellists said at the Business Standard BFSI Insight Summit 2026. The change is in relative attractiveness: stronger growth and earnings prospects in developed markets have raised the bar Indian equities must clear to draw sustained foreign institutional investor inflows.

Macquarie Capital’s Sandeep Bhatia said India’s place in the emerging-market pecking order had weakened in terms of investor flows, while stressing that this need not signal a permanent change. Developments in markets such as Indonesia, China and Brazil also shape capital allocation. A correction in the Western technology rally could prompt investors to reassess Indian equities, but that possibility is not a near-term guarantee of renewed inflows.

Oil remains a direct macroeconomic pressure point

For India, crude prices matter not only to sentiment but also to the external balance and the rupee. JP Morgan’s Sanjay Mookim said every $10 increase in oil prices, if sustained for a year, adds about $15 billion to the current account deficit. That estimate illustrates why a prolonged rise in crude can become a concern for foreign investors assessing currency and capital-flow risks.

Higher import costs can also leave households and businesses with less room for consumption and expansion, adding pressure to domestic growth. UBS’s Gautam Chhaochharia said oil was a more important near-term driver of sentiment and flows than US Treasury yields, although US rates still influence the return threshold for investors measuring Indian equities in dollars. The combination of outflows, rupee pressure and hedging activity could amplify market strain if elevated oil persists.

Technology is widening the search for growth

The competition for global capital is also changing as investors look for businesses that can benefit from new technologies, build export opportunities or deliver substantial growth. Bernstein’s Venugopal Garre argued that disruption extends beyond AI itself, with technology capable of changing business models across sectors. Traditional companies, therefore, may need to demonstrate stronger growth or clearer investment in future technologies to retain investor interest.

That challenge is visible in Indian IT services. AI adoption creates potential work as global businesses implement the technology, but UBS said investors still lack visibility on a sustained return to double-digit earnings growth over the next three to five years. IT index valuations have fallen, yet were described as not sufficiently attractive relative to global IT services companies or the broader Indian market. The distinction is important: a lower valuation alone does not establish a recovery in earnings.

Selective opportunities, not an indiscriminate call

The panel’s views suggest investors may need to distinguish between market-wide caution and specific areas of value. Chhaochharia said nominal GDP growth remained around double digits despite economic headwinds, making earnings growth of 10–14% reasonably achievable over the longer term. The more demanding question is whether profits can grow at 18–20%—a pace that would support a stronger case for Indian equities against competing markets.

Bhatia favoured Indian large-cap banks but cautioned that small- and mid-cap stocks could face further pain. He said investors with a horizon longer than two years could consider IT selectively if willing to wait. Mookim saw potential value in large-cap equities over a longer period, while warning against expecting multibagger returns or 20% compounding from that segment. These are differentiated views, not a broad-based buy signal.

Key Highlights

• Global investors are comparing India’s growth and earnings outlook more closely with opportunities in other markets.
• A sustained $10 rise in crude oil prices is estimated to add about $15 billion to India’s current account deficit.
• AI offers potential work for IT services firms, but the sector’s medium-term earnings recovery remains uncertain.
• Panelists identified large-cap banks and selective large-cap equities as areas of interest, while warning on smaller companies.
• India’s relative appeal could improve with lower oil prices, easing capital-outflow pressure and a better growth outlook.

Investor Note: The discussion points to a market where company selection and earnings visibility matter more than a broad India-growth narrative. Investors may want to assess oil sensitivity, valuation and the durability of business growth rather than treating potential foreign-flow recovery as assured.