Peacocking : India's route to bull markets

• By Jimeet Modi, Founder & Group CEO, SAMCO Group, October 2026

Every month, a momentum system asks every market it can see the same blunt question: over the past year, who has been winning and who has been losing? It does not read vision documents. It does not weigh demographics, reform announcements or the length of a runway. It looks at prices, ranks them, and acts.
We run momentum strategies for a living, and we follow what the system says even when we would rather not. So I asked our research team to put India through that machine as if India were just one more ticker on the screen. The answer was sobering.
Of the 47 national stock markets in the MSCI All Country World Index, India ranks 44th on the standard twelve-month momentum measure (Exhibit 1). In 2026, India’s market has fallen 15.9% in US dollars to 7 October, while the MSCI All Country World Index has risen 14.3% and the MSCI Emerging Markets index 24.9%. In the twelve months to 30 September, 39 of the 47 markets rose in dollar terms. India was not one of them.
India has been near the bottom before, but not for this long since our data begin in 2001. In the 23 years from December 2001 to July 2025, India spent a total of seven month-ends in the bottom decile of this ranking, the five lowest-ranked markets. Since August 2025, it has spent eleven of fourteen, including the last eight in a row (Exhibit 2).
This essay makes one argument in five steps. India has become the anti-momentum trade. A market can slip out of the bottom decile for mechanical reasons, but lasting exits tend to come in one of two broad ways: it becomes cheap enough to own, through lower prices or through years of earnings growth while prices stand still, or its story changes until it is too attractive to ignore. India is not cheap, and at today’s global interest rates the valuation route implies a painful de-rating, in price or in time. That leaves perception, and changing perception requires something India has rarely felt the need to do: actively court global capital. I call it peacocking: substantive reform, made visible to the investors who price it.

Momentum is among the most persistent findings in finance: assets that have outperformed over the past year have tended to keep outperforming for a while, and those that have lagged have tended to keep lagging. It shows up in stocks, currencies, commodities and country indices, and more weakly in bonds. AQR’s study “Value and Momentum Everywhere” (Journal of Finance, 2013) found that ranking 18 developed equity markets on their past-year returns, then owning the top third and shorting the bottom third, earned about 8.7% a year from 1978 to 2011.

Our own replication across today’s 47 MSCI ACWI markets since 2002 points the same way. Rebalanced monthly, the top momentum decile compounded at 14.4% a year in dollars and the bottom decile at 6.7%, against 9.8% for an equal-weighted basket of every market. Most of that spread came from the winners. On their own, the losers lagged the average market only modestly, and not by a statistically significant margin; the losers that kept losing were the expensive ones, as the next section shows.
The mechanics of what this means for India are simple. A global long-short momentum fund, long the top decile or quartile and short the bottom, would by construction be short India today. A long-only allocator running the same signal would simply own none. That is not a claim about what any particular fund is doing. It is a description of what the signal says.
The positioning data suggest the discretionary world has reached a similar place by a different road. HSBC, which had upgraded India to neutral in July, estimated in August that more than 80% of active global emerging-market funds were underweight India, against fewer than 20% a decade ago. BofA Global Research’s August survey of Asian fund managers found India the region’s least-preferred market, at a net 32% underweight.

Momentum rests on one simple proposition: what has been underperforming tends to keep underperforming. Not forever, and not in a straight line, but often for long enough to matter. There is, however, an exception. That exception is the whole story.

If losers kept losing forever, their share of world markets would shrink towards nothing. That does not happen. Part of the reason is mechanical. A momentum ranking is relative: a market climbs out of the bottom decile whenever its trailing return improves against everyone else’s, because it recovers, because other markets stumble, or simply because its worst months drop out of the twelve-month window. For India, that arithmetic runs the other way for now. If its prices simply stood still, its momentum return would fall to about −15% by November, as September’s fall enters the measure and last autumn’s highs become the starting point.
But a ranking that turns is not the same as losing that stops, and that is where valuation comes in. A pure momentum strategy does not care about price: it keeps shorting a loser for as long as it keeps losing. As a market falls, though, it gets cheaper. Its dividend yield rises and its multiple compresses. At some point it becomes cheap enough that staying short is no longer prudent for anyone who also looks at value.
This is why sophisticated global allocators rarely run momentum on its own. Across country equity indices, AQR’s research, which measured value by book-to-market, found value and momentum to be negatively correlated, at about −0.35, so the two hedge each other. For country indices from 1978 to 2011, a portfolio combining them earned a Sharpe ratio of 1.16, against 0.73 for momentum alone and 0.61 for value alone. (That sample ends in 2011; I return to the more recent record below.) In such a portfolio, a market in the bottom momentum decile is taken off the short list when its value score becomes strong enough to offset its momentum score. The price fall that put it on the short list is the very thing that eventually takes it off.
We tested a version of this, using dividend yield as the measure of value because it can be calculated the same way for every market in the ranking, for as long as it has been ranked. Exhibit 3 takes every month-end at which a market sat in the bottom momentum decile between December 2001 and September 2026, 1,490 market-months in all, and splits them by how expensive the market was at that point, measured by dividend yield. On average, the markets that were already cheap stopped underperforming; three years later they were 9.4% ahead of the average market, although the typical cheap loser still trailed slightly, by a median 3.5% after three years. Over the full sample, the expensive ones kept falling behind on every measure: on average by 3.9% after one year, 8.4% after two and 10.2% after three, and by more at the median. Counting each episode once, from the month a market entered the decile, the gap is smaller but points the same way: over three years, expensive losers trailed by a median 7.7% while cheap ones were 0.6% ahead, and 58% of expensive episodes lagged against 49% of cheap ones.
The pattern is sharper for expensive markets that had already spent three months or more in the bottom decile, as India has: they trailed the average market by a median 8.4% over the following year and 15.0% over two (60 episodes in 22 countries). We added that cut after looking at India’s situation, so it is a check rather than a discovery. It is weaker at the moment a market first enters the decile, when expensive markets lagged by a median 2.4% over the next year, and since 2009 they have not lagged on average at that point at all, a weakness I return to below.
Valuation does not get a market out of the bottom decile any faster. In the same data, expensive losers left the decile sooner than cheap ones: a median stay of one month against two, and only about one expensive stay in eight lasting six months or more. What separated them was what came next. Over the full sample, the typical expensive loser went on lagging for years after entry, long after most had left the decile, while cheap ones, on average, stopped falling behind. India’s current stay, eight months and counting, is already unusual for an expensive market.

The gap is economically large but statistically modest, because 25 years is not a long sample for country data. Over one and two years, it is similar when valuation is measured against each market’s own history rather than against other markets. A 1997 IMF study pointed in the same direction from a different angle: national markets that had lagged over the previous three years tended to outperform over the next three.
In plain terms, a market can leave the bottom decile at almost any price, but the losing has tended to stop when the price was right. Which brings us to a harsh reality.

The first thing the system reveals when it looks at India alongside everyone else is this: India is the only market in the world index that sits in the bottom decile on both momentum and dividend yield (Exhibit 4). The other four markets in the bottom momentum decile, namely Indonesia, China, Qatar and Kuwait, all offer higher dividend yields. India’s trailing dividend yield, 1.41% on our measure and 1.34% on MSCI’s published figure, is among the four lowest of the 47, alongside those of the United States, Taiwan and Korea, the markets most associated with the AI boom. Korea and Taiwan top the momentum table. India is priced like the leaders and trading like the laggards. On an equal-weighted blend of its momentum and dividend-yield ranks, India comes 47th of 47.

Nor is India cheap against its own history. In early September, the latest reading in our dataset, the median stock in the Nifty 750 traded at 27.5 times its expected earnings for the next twelve months, about 45% above its 2014–19 average of 19 times. Adjusted roughly for the broad market’s fall since then, it is about 26 times today. On trailing earnings, the median multiples are 32.6 times for the Nifty 750, 36.9 times for midcaps and 33.2 times for smallcaps (Exhibit 5).
Why, then, is there a widespread perception that Indian equities have become cheap? One reason is that the number most often quoted is the Nifty 50’s trailing P/E, which NSE published at 19.0 times on 8 October, the lowest reading in two years. That figure is weighted by market value, and the largest companies carry lower multiples than the typical listed share. The headline is not wrong; it is simply not representative. Nor are Indian equities cheap relative to the rest of the world. On MSCI’s own figures, MSCI India traded at 18.6 times forward earnings on 30 September, against 9.7 times for MSCI Emerging Markets, while DBS expects India’s earnings to grow 7.4% in 2026 against 71.1% for emerging markets.

Now add the discount rate.
From 2014 to 2019, the last stretch before the pandemic distorted everything, the median Nifty 750 stock traded at about 19 times forward earnings and the US 10-year Treasury yield averaged 2.3%, ranging between 1.4% and 3.2%. The median stock’s forward earnings yield, the inverse of its P/E, sat about 3 percentage points above the Treasury yield. That cushion was a rough gauge of the extra return a global investor was being offered for owning a typical Indian share instead of the world’s benchmark risk-free asset.
This month the Treasury yield has traded around 5.2–5.3%, and on 5 October it closed at 5.31%, its highest since May 2002. The cushion has not merely narrowed. It has inverted. Adjusted roughly to today’s prices, the median Indian stock offers a forward earnings yield of about 3.9%, roughly 1.4 percentage points below the Treasury, and the gap has been negative at every month-end since July 2023 (Exhibit 6). The index most foreign investors are measured against looks less extreme but tells the same story: at 18.6 times forward earnings, MSCI India’s earnings yield is about 5.4%, roughly level with the Treasury. For the index, the cushion has gone; for the median stock, it has inverted.

So, the arithmetic the question demands. If the median multiple was around 19 times when the Treasury yielded 2–3%, what should it be with the Treasury at around 5.3%? Restoring the 2014–19 gap requires an earnings yield of about 8.3%, which is a median P/E of about 12 times: 56% below the 27.5 times of early September, and about 54% below the roughly 26 times implied by today’s prices (Exhibit 7). Put the other way round, for the early-September multiple to fit the old relationship, the US 10-year would need to yield 0.6%.
I want to be careful here. This is arithmetic, not a forecast. Comparing an equity earnings yield with a nominal bond yield has well-known flaws; AQR’s “Fight the Fed Model” (2003) showed that the comparison describes how investors set prices better than it predicts returns. Nor has the relationship held in India’s own data: since 2014 the median earnings yield has not moved with the Treasury yield, and over the period as a whole the two have trended in opposite directions. The table measures the size of the gap, not a likely path. So we ran the arithmetic three ways. Against US real yields, with 10-year inflation-protected Treasuries at about 2.9%, close to their highest since 2008, the required median multiple is about 13 times. Against India’s own 10-year government bond, which has barely moved (7.29% today against a 7.48% average in 2014–19), it is about 19 times, still a de-rating of 25–30%. There is no anchor on which the median Indian stock looks cheap.

Nor does a de-rating have to arrive as a crash. It can arrive as time. If the median company’s earnings compounded at 12% a year, faster than DBS expects for the next two years, while its share price went nowhere, it would take two and a half to three years to reach the domestic-anchor multiple and about seven to reach the Treasury-anchor multiple. That is the ominous part. The valuation route could take one of two speeds: a sharp fall, or years of flat prices. Neither is a path anyone would choose.
There is a comfortable belief, often repeated, that Indian equities have corrected and are therefore cheap. The data do not support it. A fall in price is not the same thing as value. India has corrected from expensive to less expensive. It has not corrected to cheap.

The first step in solving any problem is recognising that there is one. A common explanation for India’s underperformance is that this is a normal correction, and that global capital is temporarily distracted by the AI trade. Both halves of that explanation are mistaken: this is not a normal correction, and AI is unlikely to be a passing distraction.
This is not a global sell-off. The MSCI All Country World Index is up 14.3% this year and the MSCI Emerging Markets index 24.9%. Brazil is up 35%, Colombia 52%, Peru 38%, Poland 26% and Greece 21%, none of them an AI story. Of the 47 markets, 34 have risen in 2026; India ranks 46th. Even measured in rupees, the MSCI India index is down 9.5% this year; the rupee’s slide to near-record lows against the dollar deepens that to 15.9% for a foreign investor. What India is experiencing is idiosyncratic: a risk specific to India, much of it, I would argue, of our own making.
Nor is AI likely to prove a passing distraction. India has managed to land on the wrong side of both branches of the AI decision tree. If AI wins, India’s large-cap index has little exposure to it. J.P. Morgan, cutting India to neutral in April, cited “limited exposure to next-gen tech” and noted that India’s large-cap index has “minimal AI, datacenter and semiconductor representation”. Worse, India’s largest technology exporters, its IT services companies, are widely seen as exposed to disruption by AI; the Nifty IT index has fallen 26.8% this year to 8 October.
And if AI disappoints, the money has somewhere else to go. On 5 October, J.P. Morgan’s Latin America equity strategists moved Brazil back to overweight, chiefly on election and interest-rate grounds, adding that “Brazil has the advantage (or disadvantage) of being the Anti-AI market, which is kind of an EM hedge.” In other words, some strategists now see Brazil as the hedge within emerging markets if the bet on artificial intelligence sours. India is neither the AI trade nor the hedge against it. That is our failure, not the market’s.
Accepting this requires a culture in which saying so is permitted. Too often, people who point out errors risk being labelled anti-national. An Indian who offers constructive criticism in order to improve things is not anti-national. Such criticism is the opposite of disloyalty. Markets, like countries, improve only when their errors can be named. A market that will not hear criticism hears it anyway, in its prices.

Global capital has rarely had more choice. It can own the AI build-out in Korea and Taiwan, the anti-AI hedge in Brazil, corporate-governance reform in Japan, or a 5.3% US Treasury yield with no equity risk at all. We cannot be arrogant enough to believe that we are the most beautiful option and that capital will therefore come to us anyway.
A peacock is naturally beautiful. It still displays. India has real attractions: its growth, its demography, the depth of its entrepreneurship. But many of us have grown used to assuming that capital will come regardless. I have heard television anchors say it many times:

That sentence is the clearest evidence I know that many of us stopped respecting capital some time ago, and chose arrogance over humility. Capital is not a supplicant. It is a guest that can leave, and in 2025 and 2026 it has. Foreign portfolio investors have withdrawn ₹4.58 lakh crore from Indian equities since January 2025, more than the ₹3.86 lakh crore they invested in the nine years from 2016 to 2024 combined (Exhibit 8). Their share of the market has fallen to 15.1%, the lowest in 69 quarters. India’s weight in the MSCI Emerging Markets index has nearly halved, from 20.0% in July 2024 to 10.65% in September 2026.

Japan and Korea show what peacocking looks like. In March 2023, the Tokyo Stock Exchange asked listed companies to manage with an explicit eye on their cost of capital and share price, and from January 2024 it began publishing the names of those that responded. The share of Prime-market companies trading below book value fell from 50% in July 2022 to 27% in March 2026. The year before, Japan’s prime minister had stood in the City of London and asked investors to “invest in Kishida”.
Korea launched a Corporate Value-up Programme in February 2024 to tackle the “Korea discount”, scrapped a planned tax on investment gains in December 2024, and amended its Commercial Act to make directors answerable to shareholders. When its finance ministry proposed, on 31 July 2025, to widen the capital-gains tax net, the KOSPI fell 3.88% the next day. When the proposal was withdrawn six weeks later, the index closed above 3,400 for the first time. Korea’s rally owes a great deal to the memory-chip cycle, and policy alone does not explain it. But the episode suggests how quickly capital prices a signal, in both directions.
What would peacocking mean for India? Not a marketing campaign, but reform of substance that global investors can see. Three things.

Stop being penny-wise and pound-foolish with capital
India now taxes foreign investors’ gains and trades more heavily than nearly every market a global allocator would compare it with. A foreign portfolio investor pays no capital gains tax on listed shares in the United States, the United Kingdom, Hong Kong, Singapore, Taiwan or Saudi Arabia; generally none in Japan; none below a 25% holding in Korea; and none on A-shares in China since 2014. In India, absent treaty relief, the same investor pays 12.5% on long-term gains above ₹1.25 lakh and 20% on short-term gains, plus surcharge and cess, and a 0.1% securities transaction tax on both the purchase and the sale (Exhibit 9). Of the twelve markets we compared, India is the only one that levies both a meaningful capital gains tax on foreign portfolio investors and a transaction tax on both sides of the trade.

On equity gains, the direction of travel since 2018 has been one way. Long-term gains, exempt from 2004 until 2018, are taxed at 12.5% today. Short-term gains, taxed at 10% in 2004, are taxed at 20% today. The transaction tax on derivatives was raised in October 2024 and again in April 2026. Securities transaction tax collections rose about seven-fold between FY2015-16 and FY2024-25, from ₹7,350 crore to ₹52,197 crore, largely on the back of a boom in trading volumes; the rate on delivery trades has been 0.1% since 2012.
The government already knows that tax shapes where capital goes. This year it exempted, with effect from 1 April 2026, foreign portfolio investors’ interest and capital gains on government securities from income tax, telling Parliament that it was “recognising the importance of a competitive tax regime in attracting global capital”. Equities were left out.
The revenue is real. So is the cost of capital. In FY2024-25, the securities transaction tax and long-term capital gains tax on equity together raised about ₹1.81 lakh crore. In a simple constant-growth valuation model, at the market’s multiple of about 21.5 times earnings, every quarter of a percentage point added to the return investors demand from Indian equities removes roughly 5% of their value even if companies paid out all their earnings, and more if they pay out less: upward of ₹20 lakh crore at today’s market capitalisation. That is a one-off loss of value while the revenue recurs, so this is not a simple trade-off; it is a question of incentives at the margin. I cannot prove that India’s tax regime adds a quarter-point to the return foreign investors demand. But on a 10% annual gain held for more than a year, India’s tax takes about 1.3 to 1.5 percentage points from a foreign portfolio investor, before any transaction tax. For a dollar-based investor who has also watched the rupee lose about 22% of its value against the dollar in five years, that is not a rounding error.
Would cutting these taxes bring capital back? Perhaps not on its own, and I would not promise it. What it would likely do is take India off the negative list and put it back on the neutral list, and for a market in the bottom decile, neutral is a large improvement. We need a deliberate trade-off between taxing income today and building national wealth over time.
Financial strength and defence strength are twin pillars of any country that aspires to the first rank, and there is no financial strength without buoyant capital markets. At about US$4.8 trillion, India’s market is large in absolute terms, yet India accounts for roughly 1.3% of the MSCI All Country World Index while producing about 3.3% of the world’s output. For an economy with income of about US$2,700 per head, running a current-account deficit and needing capital to invest, that is not a position of strength. We need to go above and beyond to attract capital, not ask more of it than everyone else does.

From regulation to policy-making
The second change is one of posture. In 1896, in a case concerning the audit of a cotton-spinning company, the English Court of Appeal described an auditor’s duty in words every regulator could keep on the desk: “He is a watch-dog, but not a bloodhound.” A watchdog guards the house and barks when something is wrong. A bloodhound hunts.
Markets need watchdogs. They need fraud found and punished, disclosure enforced and systemic risk contained. What they do not need is a state that sets out to choose outcomes for them: which products investors should prefer, how much trading is too much, which risks adults may take. None of this is an argument against catching fraud. It is an argument for intervention that is proportionate, predictable and set out in advance. Markets, like people, value freedom. Rather than imposing choices on markets, the state should build the platforms, set the rules, punish the cheats, and then let markets decide for themselves. The message needs to go out loud and clear: India is in the business of policy-making, not of choosing outcomes for investors.

Sharper five-year plans, measured by outcomes
The third change reaches beyond markets, but it ultimately decides whether India deserves a higher multiple. Indonesia has written its 2045 “Golden Indonesia” vision into law; India has Viksit Bharat @2047. Vision documents are necessary but not sufficient. Beneath them we need a sharper five-year plan, with measurable targets and the discipline to stop doing what does not work.
The record shows why. Manufacturing was about 14.8% of India’s gross value added in FY2025-26, roughly 13.5% of GDP, broadly where it has been for a decade, against a 25% target first set in 2011 for 2022 and since proposed for 2035. India’s share of world merchandise exports has held between 1.6% and 1.8% since 2011.
A plan that cannot say what it will stop doing will end up measuring announcements. Five priorities, in the order that binds.
First, deregulation with an exit rule. Repeal what fails an export or employment test. Complete the state-level operation of the four labour codes, in force nationally since November 2025. Keep cutting quality-control orders that do not serve safety: 143 covered 723 products at the end of 2025. Measure commercial disputes in months, not the 1,445 days the World Bank last recorded for enforcing a contract in India. End subsidies that miss their numbers. Capital, domestic and foreign, should be free to enter and free to leave. Welcoming a cheque without an exit is not an open economy.
Second, paid work at scale. Back labour-using tradables, such as apparel, footwear, food processing, light engineering, tourism and care, scored by formal jobs and export share per rupee of support. On the 2016-17 Economic Survey’s estimate, apparel creates about 80 times as many jobs per unit of investment as automobiles. Women’s paid work belongs inside this target: on ILO estimates, 32% of Indian women are in the labour force, against 54% in Indonesia and 69% in Vietnam.
Third, cities that can take people in: buildable land, predictable density, housing, and municipal governments that can tax and borrow. Firms will not cluster, and women will not take the jobs, where floor space is a negotiation.
Fourth, learning and basic health, measured by grade-level reading and arithmetic, stunting and days lost to illness, not by schools built or schemes launched.
Fifth, cut crude imports. India imports 88.7% of the crude oil it uses, at a cost of US$123 billion in FY2025-26. The levers are efficiency, electric buses and two-wheelers, domestic gas, strategic reserves and nuclear power. Solar does not clear the oil bill. Deterrence, and a domestic supply of ammunition, sensors and drones, should continue on a capped budget.

The argument against
The argument against — and I want to write the strongest version, the version a thoughtful sceptic would make.
First, the messenger has an interest. The group I lead includes a stockbroker that would benefit from lower transaction taxes and lighter limits on derivatives trading, and a fund house that benefits from buoyant markets. Readers should weigh the argument accordingly. Most of the data are public, the valuation series is SAMCO research, and the arithmetic is reproducible; the argument should be judged on that basis.
Second, country momentum, and the value exit itself, have been weaker since 2009. In AQR’s publicly available factor data for developed markets, country momentum, country value and their combination have all earned close to nothing since then. In our 47-market replication, the gap between the top and bottom deciles has averaged about 4% a year since 2009 and about 2.4% since 2016, neither statistically significant, and expensive markets measured at the month they first entered the bottom decile have not lagged on average since 2009. If few investors now run country momentum at scale, why should India’s rank matter? There are two answers. The momentum rank is not only a strategy; it is a description of where capital has been going, and the positioning surveys show discretionary managers in a similar place. And the evidence closest to India’s situation points the same way: since 2009, expensive markets that had already spent three months or more in the bottom decile still trailed the average market by a median 8.1% over the following year and 10.2% over two. Those figures pool overlapping month-ends from 41 episodes; counting each episode once, from the first month it qualified, the median shortfall over the following year is about 5%, and about six in ten episodes lagged.
Third, India itself is an awkward case for the dividend-yield measure. In each of its seven earlier bottom-decile months, India was among the lowest-yielding third of markets, yet over the following year it beat the average market by about 8% on average, outperforming in four of the seven cases. Dividend yield understates value in a market whose companies pay out relatively little, which is why section 3 rests on earnings multiples as well. Measured against its own history, the picture is mixed: the late-2008 rebound began when India’s yield was unusually high for India, but September 2011 and September 2013 looked alike on that measure and were followed by opposite outcomes. Today India’s dividend yield is near the middle of its own range, while its median earnings multiple is well above its 2014–19 average.
Fourth, India’s valuation is now set at home, not in New York. Domestic institutions own more of India than foreign investors do, 19.5% against 15.1%, the widest gap in NSE’s ownership data, which begin in 2001, and they bought a record ₹7.88 lakh crore of equities in 2025. Monthly SIP contributions reached ₹32,297 crore in August. If the marginal buyer is a domestic saver whose alternative is a 7.3% government bond, not a 5.3% Treasury, the Treasury arithmetic is beside the point. This is the strongest objection, and I accept part of it; it is why the domestic anchor in Exhibit 7 gives a gentler answer. But it describes a market with two discount rates: domestic savers pricing India off a bond yield that has barely moved, and foreign investors pricing it off one that has risen by three percentage points. The distance between the two helps explain the flows in Exhibit 8. Domestic money can absorb foreign selling for a long time. It does not change the price at which foreign capital would return, and even on the domestic anchor, the median stock is not cheap.
Fifth, earnings can do the work. Indian companies may grow into their multiples. That is true, and it is the time version of the valuation route described above: two and a half to three years of 12% earnings growth with flat prices to reach the domestic-anchor multiple, about seven to reach the Treasury anchor. It is the gentler path. It is also a path of years without price gains.
Sixth, tax cuts might not bring anyone back. Korea’s surge owes much to memory chips, and Japan’s to forces well beyond its stock exchange’s request. Perhaps. I have not argued that policy alone re-rates a market. I have argued that a market in the bottom decile on both momentum and yield cannot afford to be near the bottom on how it treats capital as well.
None of this makes the conclusion certain. If US yields fall sharply, the arithmetic softens. If Indian earnings surprise on the upside, the time path shortens. The honest summary is that the lasting routes out of the bottom decile run through valuation, by price or by time, or through a change in perception. Markets set the price and the clock. Policy is ours to set, and perception is ours to influence.

What this means now
For investors, the first implication is to drop the idea that India’s correction has made it cheap. Valuations offer less of a cushion than the headline index suggests, and the history in Exhibit 3 suggests that expensive markets in the bottom decile have tended to keep lagging after they leave it, while cheap ones, on average, have not.
The second is to keep two questions apart. Cross-country momentum ranks India against Brazil and Korea. Within India, relative strength still exists stock by stock and sector by sector, and a disciplined domestic momentum process continues to rank Indian companies against one another, whatever the country’s global standing. One is a question about India’s place in the world. The other is a question about which Indian companies are leading.
For policymakers, the implication is the one this essay has argued: the valuation route out of the bottom decile is one nobody would choose, and the perception route has to be built, deliberately and visibly.
Here is a test we will come back to. If this framework is right, then between now and September 2027 India should not spend six consecutive month-ends outside the bottom fifth of the momentum table (the ten lowest-ranked markets) while its median forward P/E stays above 23 times, more than 20% above its 2014–19 average, unless the government first cuts the capital gains tax or the securities transaction tax that foreign portfolio investors pay. Six consecutive months guards against a quirk of the twelve-month window. In our data, a little under a quarter of expensive markets in India’s position did so within a year while staying in the most expensive third of markets, so this is a test the framework can fail. We will report the result in October 2027, whichever way it goes.

Conclusion
India is the anti-momentum trade. The way out through valuation would be brutal: restoring the median stock’s 2014–19 relationship with bond yields would take a de-rating of between a quarter and a little over a half, depending on the yardstick, reached through lower prices, years of flat prices, or both. That is not a path anyone should wish for. The alternative is a change in the perception and narrative of India among global investors, on taxes, on the posture of the state, and on a short list of priorities measured by outcomes rather than announcements. That requires peacocking on a scale this country has rarely attempted. The peacock is beautiful. It is time it displayed.

SOURCES
– MSCI: end-of-day index levels for 47 MSCI ACWI country indices and the MSCI ACWI, World and Emerging Markets indices (USD; net, gross and price); index factsheets, 30 September 2026.
– National Stock Exchange of India: index P/E as published; India Ownership Tracker, June 2026 quarter; Market Pulse, September 2026; closing index levels.
– NSDL: foreign portfolio investor net investment in equity, calendar years 2016 to 2026.
– BSE: all-India market capitalisation. Reserve Bank of India: reference rate. Association of Mutual Funds in India: SIP contributions.
– Union Receipt Budgets, FY2017-18 to FY2026-27; Central Board of Direct Taxes, direct tax collections as on 31 March 2026; Lok Sabha Unstarred Question 166 (20 July 2026); Finance Acts 2004 to 2026.
– Federal Reserve Board, H.15 Selected Interest Rates (US 10-year nominal and inflation-protected yields), and OECD (India 10-year yield), via FRED; TradingView (latest yields).
– Ministry of Statistics and Programme Implementation, national accounts (2022-23 base); Economic Survey 2016-17 and 2025-26; Press Information Bureau; Petroleum Planning & Analysis Cell; World Bank and World Trade Organization data; International Labour Organization modelled estimates.
– J.P. Morgan, LatAm Equity Strategy, “Brazil Back to OW, Downgrading Chile to Neutral”, 5 October 2026; J.P. Morgan India equity strategy, 24 April 2026; HSBC Global Research, 5 August 2026; BofA Global Research, Asia Fund Manager Survey, August 2026; DBS Bank, CIO Insights 4Q26, 29 September 2026.
– AQR Capital Management: “Value and Momentum Everywhere”, Journal of Finance (2013), and the associated public factor data; “Fight the Fed Model”, Journal of Portfolio Management (2003). International Monetary Fund, Working Paper 97/182 (1997).
– Japan Exchange Group / Tokyo Stock Exchange; Financial Services Agency of Japan; Prime Minister’s Office of Japan. Financial Services Commission, Republic of Korea; Ministry of Economy and Finance, Republic of Korea; Korea Exchange.
– Re Kingston Cotton Mill Co (No 2) [1896] 2 Ch 279 (Court of Appeal). Republic of Indonesia, Law No. 59 of 2024 on the National Long-Term Development Plan 2025–2045. Prime Minister’s Office of India, Viksit Bharat @2047.
– PwC Worldwide Tax Summaries (2026 reviews); Deloitte International Tax Highlights 2026; HM Revenue & Customs; Hong Kong Inland Revenue Department; Inland Revenue Authority of Singapore; HKEX Stock Connect Information Book.
DATA NOTES
Country returns are MSCI country indices in US dollars, net total return, from 29 December 2000 (UAE, Qatar and Kuwait from June 2005, Saudi Arabia from September 2014) to 7 October 2026, for the 47 countries in the MSCI ACWI in 2026; the MSCI ACWI, MSCI World and MSCI Emerging Markets indices are the benchmarks. Momentum is the standard 12-1 measure (the return over the past twelve months excluding the most recent month); ranks are taken at month-ends from December 2001 to September 2026, the ranking covers 43 markets from December 2001, 46 from June 2006 and 47 from September 2015, and the bottom decile is the five lowest-ranked markets. Dividend yields are trailing twelve-month dividends derived from MSCI gross and price index levels, calculated the same way for all 47 markets; MSCI’s published factsheet yield for India on 30 September 2026 is 1.34%, against 1.41% on this measure, so using the published figure would move India further down the yield ranking, not up. Event-study figures use every month-end a market spent in the bottom decile, averaged across monthly cohorts, with one-, two- and three-year results using month-ends up to September 2025, September 2024 and September 2023 respectively, so that every forward window ends by September 2026; episode figures count each run of consecutive bottom-decile months once, from its first month; results at first entry and for markets with three or more consecutive months in the decile are reported in the text. Valuation data are SAMCO research: the daily median 12-month forward P/E of Nifty 750 constituents from 31 March 2014 to the latest reading (dataset dated 9 September 2026), adjusted approximately to 8 October prices using the Nifty Total Market index, and median and mean trailing P/E as at 8 October 2026 for constituents with a reported trailing P/E; index P/E figures are as published by NSE (8 October 2026) and MSCI (30 September 2026). Flow, ownership, tax and macroeconomic data are from the official sources listed above. Applying today’s index membership to earlier years introduces some look-ahead bias into the historical country analysis. Index returns are gross of fund-level expenses, transaction costs and taxes; returns on any investable fund would be lower by the cost of implementation. This article does not refer to the performance of any SAMCO Mutual Fund scheme. Past performance may or may not be sustained in future.
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