Global funds return to India as earnings outlook improves

Group 1 - Foreign investors are returning to Indian stocks at the fastest pace in eight months, with nearly $2.1 billion of local shares purchased in February, indicating strong inflows since June [1][2] - The recent US trade deal has removed uncertainty for the $5.2 trillion Indian market, contributing to the positive momentum in corporate earnings and stock performance [2][3] - The MSCI India Index gained 8.1% last year, supported by local investors, despite foreign investors cutting exposure in 2025 [3] Group 2 - Indian equities have underperformed compared to the MSCI Asia Pacific Index, which surged 25% in 2025, leaving Indian valuations relatively low, trading about 4% below their five-year average price-to-earnings ratio [4] - Earnings for FTSE India Index companies rose 10% year-on-year in the December quarter, with net income climbing 13%, indicating a recovery in corporate earnings [5] - Consensus estimates suggest fiscal 2027 earnings growth of 16% for over 250 companies, supported by recovery in nominal GDP growth, private capex, and consumption [5][6] Group 3 - Financial companies are among the top picks for global investors, with increased interest in metals and capital goods sectors [6] - Some investors caution against viewing the latest inflows as the beginning of a structural bull run, as concerns over AI's impact on software and tech firms have led to significant market value losses [6] - Foreign funds' buying is partly tactical, influenced by softer US yields and emerging-market appeal, with a cautious but clear global positioning toward India [7]