US–India Relations: The First Catalyst
Batra believes improving ties with the US could lead to a re-rating of Indian equities. Tariff reductions and diplomatic cooperation could lower India’s risk premium, enabling valuation gains similar to other emerging markets such as Korea, Taiwan, and China. Investors are closely watching this development for potential market upside.
Earnings Growth: The Second Hurdle
India’s trailing 12-month earnings growth has stagnated at 4.5–5%, while valuations remain high near 22 times price-to-earnings. Batra says foreign investors are seeking sustained double-digit earnings growth to justify fresh inflows into Indian markets.
Policy Reforms: The Third Factor
Following monetary easing, corporate tax cuts, and GST reforms, the next phase of reforms is expected to focus on deregulation and easier foreign direct and portfolio investment rules. Batra predicts GST 2.0 and consumption-driven growth will remain dominant for the next 4–5 years, benefiting sectors like automobiles, jewellery, and other discretionary goods.
Emerging Market Outlook
Batra forecasts 20–25% upside for emerging market equities over the next 12 months, driven by synchronized easing cycles and a declining US dollar. The US Dollar Index is projected to drop to 95 by year-end 2025 and 92 by mid-2026, potentially boosting EM equity performance.
