India could once again become a compelling destination for foreign portfolio investors, with corporate earnings growth potentially translating into around 11% growth in dollar terms — a market-wide proposition that few other countries can offer. But the opportunity comes with a policy caveat: any retreat by the government from its signals on reducing the tax burden on investors could weaken the very sentiment that is beginning to bring foreign money back.
The case for India rests on a sharp improvement in earnings growth. Indian companies delivered rupee earnings growth of just 9–10% over the past two years. With the rupee depreciating by 5–6% annually, that left dollar earnings growth at only around 3–5%, making Indian equities less attractive to global investors.
That equation could now change. Earnings growth in rupee terms could rise to 14–15%, while currency depreciation moderates to around 3% a year. The resulting dollar earnings growth of about 11% would make India stand out, says Samir Arora, founder of Helios Capital.
"At 11%, the whole world will be desperate because nobody gives 11% dollar returns at a market level," Arora said in an interview with Moneycontrol. He draws a distinction between individual stocks that can deliver exceptional returns and an entire market offering double-digit growth. In his view, the latter is becoming harder to find as the extraordinary earnings expansion that powered some global markets begins to normalise.
The opportunity is also being strengthened by a change in the global investment landscape. The near-unquestioned trade of buying AI-linked stocks has lost some of its momentum, while India's relative appeal is improving. Arora cautions against positioning India merely as a refuge when other markets fall. Its attraction, he argues, should come from its own earnings prospects rather than from the weakness of competitors.