Global capital is circling back to Dalal Street.
The verdict from CLSA is clear: the "There Is No Alternative" thesis—the long-running India TINA trade—has returned. Foreign allocators are unwinding concentrated technology bets across Asia and directing liquid funds back toward Mumbai.
Speaking at the CITIC CLSA India Forum, Vikash Kumar Jain, India Strategist and Head of India Research at CLSA, confirmed the institutional pivot.
We turned positive sometime around early April, and that was still more absolute positive. Sometime over the last week or 10 days, we've turned relative positive as well.
The timing tracks an abrupt divergence in regional returns. Indian benchmarks have decoupled from developing-market peers at breakneck speed, capitalizing on early-quarter reallocations.
"Just imagine, this quarter itself; it's been not even half of the quarter gone, we've seen India outperform EM by almost 25 percentage points in just six weeks," Jain said. Investors, he noted, are treating India as an essential diversified market play rather than a passive peripheral holding.
The rally comes despite Dalal Street lacking mega-cap artificial intelligence pure-plays. Global money managers spent months chasing semiconductor hardware across North Asia. But portfolio managers are hitting valuation limits.
India offers an alternative channel. The country sits on a deep engineering talent base and an accelerating footprint of Global Capability Centres (GCCs). Rather than writing foundational AI software, domestic enterprises stand to extract cash through rapid operational deployment.
Jain noted that productivity gains will tilt heavily toward balance sheets that successfully integrate applied tools to lower operational overhead, rather than speculative tech developers.
Market Context: The institutional upgrade marks a decisive reversal from early-year portfolio rebalancing, when foreign funds trimmed Indian exposure to fund cheap cyclicals elsewhere. A 25-percentage-point performance delta in six weeks signals that structural domestic liquidity is once again overpowering tactical foreign outflows.
| Macro Parameter | CLSA Target / Projection | Market Implication |
|---|---|---|
| EM Outperformance Delta | 25 percentage points | Recorded across the trailing 6-week window |
| Peak Consumer Price Inflation | ~6.25% (December) | Breaches 5% band before peaking; eases early 2027 |
| Second-Half GDP Trajectory | ~6.00% | Potential to slip below 6% in March quarter |
| RBI Policy Action | One rate hike (December) | Final terminal hike before policy pause |
The fundamental macro backdrop remains fraught with friction.
Nikhil Gupta, India Economist at CLSA, cautioned that headline price pressures have not fully played out. Retail inflation is set to punch above 5% and reach a peak close to 6.25% in December before beginning a protracted retreat into early 2027.
"We are working with only one rate hike... in December," Gupta said. A single final tightening move from the Reserve Bank of India should suffice, he argued, because cooling growth into the new year will eliminate the appetite for further monetary intervention.
Growth is already losing steam. First-half momentum drew strength from aggressive central government capital outlays, Goods and Services Tax windfalls, and retail subsidies that buffered household wallets. Those cushions are now dissolving.
Gupta expects second-half gross domestic product growth to slow toward 6%, with the March quarter threatening to break lower. Slower state disbursements, balance-sheet cost pass-throughs by manufacturers, and agricultural shortfalls linked to El Niño weather patterns are intersecting at once.
Currency desks, however, face calmer waters. The Indian rupee has anchored within a predictable band, supported by central bank reserves, lower global crude quotations, and steady equity purchase tickets. Gupta targets the currency to hover between 93.5 and 95 per dollar over coming months, aided by Brent crude settling in an average range of $80 to $82 per barrel.
Equity strategists at the brokerage are directing fresh capital toward two heavyweight sectors where risk-reward ratios have re-aligned: consumer staples and banking.
Consumer staples shares suffered sustained multiple compression during the recent market correction. Jain identified the sell-off as an entry window. Historically, elevated consumer inflation and tightening interest rate cycles channel domestic funds into defensive household balance sheets, laying the groundwork for a sustained, multi-month re-rating.
Banking counters present an even sharper valuation disconnect. Domestic lenders carry light foreign institutional ownership levels while trading at significant discounts to global historical multiples.
Net interest margins and credit cycles remain defensible. While monsoon irregularities pose periodic risks to rural repayment schedules, Jain argued the impending turn in the broader monetary cycle positions commercial banks to capture high-margin corporate credit pickup.
All eyes now turn to AirNews Street's December monetary policy review, where the Reserve Bank of India will weigh peak headline inflation against an impending mid-year growth deceleration.
| Rupee Exchange Range |
| 93.5 to 95 per USD |
| Backed by RBI interventions and equity flows |
| FY Brent Crude Benchmark | $80 to $82 per barrel | Assumes West Asian supply gains and stable shipping |