India Equity Strategy Playbook: Defensive Growth Market

Research evidence excerpt

India Equity Strategy Playbook: Defensive Growth Market

Foundation

May 12, 2026 11:30 PM GMT

Morgan Stanley India Company Private Limited+MIndia Equity Strategy Playbook | Asia Pacific Ridham Desai

Equity Strategist

Defensive Growth Market Ridham.Desai@morganstanley.comNayant Parekh +91 22 6118-2222

Nayant.Parekh@morganstanley.com +91 22 6118-1008

With growth acceleration likely in the pipeline and valuations

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and sentiment at near extremes, Indian equities are poised for a

1Q26 Ownership Trends: FPI Ownership at 16-

strong year ahead. year Low

India's likely growth turn: Earnings growth is turning after a six-quarter mid-cycle India Economics & Strategy: Opportunities and

slowdown and is likely to accelerate further, driven by reflationary policies of the Risks amid Conflict

RBI and the government via rate cuts, bank deregulation and liquidity infusion, "DREAM" Run: Equity Inflows Intact

strong capex trends in energy, defence, semiconductors, fertilizers and data centres QE Mar-26 Earnings so Far

among others, large tax cuts and relatively stimulating fiscal. Thus, India’s hawkish India Economics and Strategy: Building Blocks of

macro set up post-Covid, which drove apathy towards the Indian market, has India's Prosperity

unwound. The trade deals with the US and the EU, and thawing of China relations, The New India: Why This Is India's Decade

add to the mix. The currency is undervalued on a real effective basis and domestic The US$10 Trillion Positive Wealth Shock

equity flows are stronger than ever. The trailing 12M relative performance is the

worst in history, relative valuations are at previous troughs and foreign positioning is

at multi-year lows. India’s share of global profits exceeds its global index weight by

the highest margin ever ex-2009.