If India starts performing, underweight investors may fuel the rally, says 360 ONE Asset

That gap between curiosity and capital reflects a simple reality: investors still see stronger earnings momentum elsewhere, said Anup Maheshwari, co-founder and chief investment officer of 360 ONE Asset, who managed assets worth ₹47,185 crore as of December 2025.

Some global investors are reallocating from the US to Europe, and emerging markets (EMs) have benefited from potential US outflows. Normally, that would translate into flows for India. Instead, investors remain underweight, preferring markets where earnings upgrades are more visible, Maheshwari said.

For now, investors see little risk in staying underweight on India, he said. But that positioning could become painful if conditions shift. A weakening artificial intelligence (AI) theme, stretched global valuations or a broader market correction could make India look relatively attractive.

“For now, they’re not losing much by avoiding India, as the market isn’t moving significantly. But optimistically, if India starts performing, many global investors are underweight and may have to cover their underweight positions, which could support the rally for a while.”

Edited excerpts:

For investors who are underweight on India, do you see that as a risk, especially given earnings expectations are improving?

Today, they don’t see enough risk in staying underweight on India because they’re finding better growth opportunities overseas. If the AI theme sees some weakness, valuations stretch globally, or markets correct, India could look better on a relative basis and their underweight position might hurt.

For now, they’re not losing much by avoiding India, as the market isn’t moving significantly. But optimistically, if India starts performing, many global investors are underweight and may have to cover their underweight positions, which could support the rally for a while.

In discussions with clients, what is the underlying sentiment?

Let me break it into two parts. From companies’ standpoint, things are more optimistic than six months ago. Earnings have improved and fundamentals look better.

Client sentiment moves more slowly and is shaped by market performance. There are two sets of clients - global institutional and local high net-worth individual (HNI) retail. Global institutional clients have the world as an option. India has underperformed over the last year and a half, so interest in India came off significantly. For most of last year, we saw very little interest. Starting this year, we’re seeing sporadic interest return. Some global investors are contrarian; they’ve seen markets do nothing for a while and are coming back to explore opportunities. So there’s a slight pickup in interest, but nothing dramatic internationally.

Domestically, sentiment is mixed. Last year was brutal, particularly for small-cap investors, and there is hesitation to go all-in without a clear market trend. A year ago, fund managers were more cautious while clients were more positive; now that has flipped, with clients more cautious and fund managers turning relatively more optimistic.

Why the divergence?

Because fund managers focus on earnings and are constantly speaking to companies, so our views tend to reflect what companies are saying and what’s happening on the ground. Markets, however, are reacting to many broader concerns, I am aggregating here, and there are pockets of real discomfort.

Take IT, for example. Stocks have fallen 35-40% in a matter of weeks. Yet when you speak to IT companies, they say they’re not seeing any business change that justifies that kind of fall, at least not yet. It could become a future issue, but for now they maintain that the next few quarters look similar to what they did a quarter ago, if not slightly better.

So when you talk to companies, you gain more confidence, even though stock prices are signalling something very different. That’s the dichotomy.

With global uncertainty and tariff concerns, do you expect capital to return to the US or to India?

There’s a growing consensus that in a less globalised world, with deglobalisation and rising tariff barriers, capital tends to flow back to home markets. Some investors are reallocating from the US to Europe, and emerging markets have benefited from potential US outflows.

Normally, if emerging markets do well, India should see flows. But that hasn’t happened. While EMs have received inflows, investors have stayed underweight on India due to stronger earnings elsewhere.

For example, Korea has seen nearly 60% earnings upgrades over nine months, with another ~15% recently, and markets have reflected that. Investors are going where earnings are visibly reviving and momentum is strong, and avoiding stagnant growth.

Last year’s AI divide also hurt India, which was seen more as a laggard. Growth here is steady, not dramatic like in markets with sharp upgrades. So interest remains limited, with capital flowing to regions showing stronger visible growth.

With global uncertainty and tariff concerns, do you expect capital to return to the US or to India?

There is growing consensus that in a less globalized world, capital tends to move closer to home markets. Some investors are reallocating from the US to Europe, and emerging markets have benefited. Normally, if emerging markets do well, India should see flows. But that hasn’t happened. While EMs have received inflows, investors have stayed underweight on India due to stronger earnings elsewhere.

For example, Korea has seen nearly 60% earnings upgrades over nine months, with approximately another 15% recently, and markets have reflected that. Investors are going where earnings are visibly reviving and momentum is strong, and avoiding stagnant growth.

Last year’s AI divide also hurt India, which was seen more as a laggard. Growth here is steady, not dramatic like in markets with sharp upgrades. So interest remains limited, with capital flowing to regions showing stronger visible growth.

How do you, then, pitch India to foreign clients?

India needs to be seen as a market with steady growth and compounding over time. FY26 saw earnings downgrades through most of the year, but earnings outlook looks much better for FY27.

Nearly a third of our market is financials, where credit growth is reviving, balance sheets are healthy, and earnings growth will be good on a low base. We are seeing a better outlook in consumption sectors as well. The macro-environment for India is very stable as well. Trade deals have been struck. And having massively underperformed emerging markets over the past 18 months, India's valuation is now back in line with its long term average relative to emerging markets.

With domestic investors, the dialogue is easier because their choices are more limited. With international investors, we make the same pitch, but they may or may not engage beyond a point. As I said, interest levels are picking up slightly, but we’re not yet seeing that translate into actual flows.

Which sectors resonate most with global investors?

Telecom is one area we highlight. It is now a consolidated industry with improving pricing power and economics, creating the potential for steady compounding. Financials are another key area given the stronger operating environment and earnings outlook.

We also like parts of consumer discretionary, particularly autos. While there’s broader discussion about discretionary spending picking up due to tax measures and other factors, autos are where we’re clearly seeing numbers improve. Within autos, segments like commercial vehicles are entering a cyclical upturn.

What about new-age companies?

These models aren’t unique to India - food delivery and quick commerce exist globally. What investors assess is competitive intensity, opportunity size, and pricing power.

In quick commerce, even with a clear leader, concerns remain around competition, aggressive expansion, and pricing discipline. So despite a large opportunity, the focus is on growth and how sustainable the economics are.

So investors look at sectors through this lens: market size, growth, competition, and pricing power. They prefer large opportunities and leaders, but become far more constructive when they see consolidation and improving pricing dynamics.

Are equities losing appeal amid the rally in gold and silver?

In the short term, yes, but rallies of that scale don’t last. If something rises 100% in a year, people naturally feel left out and chase it.

Human behaviour extrapolates trends. Rising markets create more confidence and falling markets lead to more caution, though logic often suggests the opposite. The same applies to commodities: as prices rise, narratives strengthen and money flows in, as seen with systematic investment plans (SIPs) moving to gold, silver, and ETFs.

But nothing compounds at 50% for years. When commodities surge and equities stagnate, money follows momentum, though it can flip quickly. That’s why a longer-term view matters. Commodities have drawn attention away from equities in the short term, though some investors are playing the theme via listed commodity stocks.

Where are investors allocating instead?

Private equity, and especially private credit, are definitely seeing strong interest, largely from high net worth individuals, since this isn’t a retail product.

In private equity, you typically find much higher-growth companies because they’re earlier in their journey. These are newer businesses, new management teams, and less-discovered stories. As I said earlier, in public markets, especially among large caps, you don’t often see companies growing at 50% plus. In private markets, you can find such ideas, which is why there’s meaningful interest.

Private credit is different. We focus on performing credit, delivering roughly 14-17% yields. We’re not in distressed credit, where returns target 23-25%. Performing credit is fully securitized and backed by collateral, making it relatively lower risk.

Here too, HNIs are interested because fixed income options are limited: fixed deposits, corporate bonds, or mutual funds rarely deliver double-digit post-tax returns. Structured credit can offer that, while still preserving capital.

So private credit, in particular, is a significant growth opportunity and likely to attract increasing HNI capital over time.

How attractive is fixed income currently?

Inflation is likely to rise from here, and there appears limited scope for further rate cuts after significant liquidity injections. We therefore have a more modest outlook on fixed income and remain more positive on equities on an absolute return basis.