India Ranks #1 Among Emerging Markets, So What Happens After Two Flat Years?

Mint's Emerging Markets Tracker, a monthly scorecard published by Mint (Hindustan Times Group), put India at the top of 12 tracked economies in its September edition (data as of September 23) with a composite score of 72.9, ahead of Vietnam at 66.9 and Malaysia at 64.5, ranks that held steady from the prior month. The score is built from seven indicators, and India led on most of them:

Real GDP growth near 7.8% and export growth of 26% are the standout numbers, well ahead of what most large emerging economies are managing right now, and inflation at 4.8% alongside import cover of over 10 months rounds out a picture of growth without the usual overheating warning signs. Here's how India compares to the next two:

Here's the part worth sitting with, though. India topping a global macro scorecard hasn't translated into standout index returns, the Nifty 50's five year CAGR sits around 7.1%, well below what an economy growing at this pace would suggest. Index returns depend heavily on how a small set of large, heavily weighted stocks perform, not on the health of the broader economy, and that gap between fundamentals and index price is exactly what we've unpacked in our piece on choosing the right benchmark. We come back to this gap in more depth in story six below.

India's volatility index fell to around 10.52 this week, continuing its recent downtrend, even as foreign institutional investors extended their selling streak, one session alone saw FIIs sell roughly Rs 3,810 crore. Domestic institutional investors absorbed it comfortably, buying about Rs 4,120 crore the same day. Zoomed out, FII outflows for 2026 year-to-date now stand at roughly $25.87 billion, a substantial number, yet it hasn't translated into the kind of volatility spike that pattern would normally suggest. The rupee had a choppier week than that headline number suggests, Houthi strikes on Saudi Aramco facilities in Yanbu and near Riyadh on Thursday sent Brent crude surging past $108 intraday, its sharpest jump in weeks, and pushed the rupee toward the 96 mark. By Friday, crude had eased slightly to settle near $105, and the rupee actually recovered 19 paise to close the week at 95.80, helped by easing risk sentiment around a proposed US-Iran deal and, reportedly, some RBI support near the 96 level.

NSE listed on the BSE on September 24, closing its debut session at Rs 1,817, about 1.8% above its Rs 1,785 issue price. It was a modest debut by rupee-crore standards for an issue this large, but a genuinely significant one in context. NSE first filed for an IPO back in 2016, and the listing had been held up for close to a decade by regulatory proceedings (see our earlier coverage of the IPO's subscription rush the week before). Since the offer was structured entirely as a sale by existing shareholders, none of the proceeds went to NSE itself, it was existing holders realising their stake through the public market.

Fed Governor Christopher Waller told the New York Economic Club on September 21 that the Fed's recent pause "carries no implication" for a rate cut in November, choosing the word "not" rather than softer language like "unlikely" when asked directly whether a cut was coming this year. The market reaction was immediate. The S&P 500 had been up 0.7% that morning on Iran diplomacy optimism, and gave almost all of it back within 40 minutes of Waller's remarks, closing up just 0.2%. The 10-year US Treasury yield jumped 9 basis points to around 5.02% in the same two hour window, and kept climbing through the week to close around 5.19% by Friday. Rate-sensitive sectors took the brunt of it, homebuilders fell 2.1%, utilities dropped 1.4%, and REITs declined 1.9%, while energy stocks moved higher on the view that persistent oil prices were reinforcing the Fed's hawkish stance.

Rob Subbaraman, head of global macro research at Nomura, flagged that the RBI could raise its policy rate twice more in 2026, at the October and December meetings, taking it higher from its current level of around 5.25%. The reasoning centres on inflation. India's consumer price inflation rose to 4.82% in August, above the RBI's 4% medium term target, and rising crude oil prices are adding further pressure through transportation and production costs. Nomura's own caveat is worth repeating plainly: the timing and size of any actual increase will depend on incoming inflation, growth, and liquidity data, this is an assessment, not a confirmed decision.

Zoom out from this week's individual headlines to the bigger structural question that's been sitting underneath all of them, the Nifty has been essentially flat for two years now. That's an unusual stretch in its own right. Edelweiss Mutual Fund's analysis of data since 2001, as reported by Whalesbook, has identified 11 broadly comparable periods of multi-year Nifty stagnation, most followed by positive returns over the subsequent one to three years. That source doesn't publish the exact criteria used to define each period, so treat the count as directional rather than a precise, replicable measure. A historical base rate isn't a promise, and past patterns don't guarantee future outcomes, but a stretch this rare is worth treating as a starting-point signal rather than a warning sign.

The valuation and earnings picture backs this up more concretely than the base rate alone. DSP Mutual Fund's Sahil Kapoor, in a BusinessToday interview, points out that Nifty is now trading close to 20 times trailing earnings and under 3 times book value, meaningfully closer to fair value than it has been in several years, precisely because two years of flat prices let earnings and book values catch up while the index itself went nowhere. Nifty profits in the latest quarter hit a 10-quarter high, and India's nominal GDP grew 10.3% in the June quarter, comfortably inside the 10 to 12% range Kapoor treats as a sustainable ceiling for corporate revenue growth. His own framework is worth quoting directly: if earnings keep growing at 10 to 12% from here and valuations simply hold where they are, index returns could broadly track that earnings growth, a meaningfully better setup than compressing further from an expensive starting point. Kapoor is careful to add that he does not have a specific Nifty target for the next 12 months, and neither do we.

One more global tailwind worth naming, while treating it as a developing narrative rather than a confirmed trend. Jefferies has flagged what it calls "AI fatigue," global investors starting to question whether the AI-driven rally in US technology stocks has peaked, and rotating into cheaper, non-AI "value" names instead, including markets like India and China that haven't participated as heavily in that run-up. If that rotation continues, it could add a fresh source of foreign flows on top of India's own earnings recovery, layering on to the domestic story already covered in stories one and two above.

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