India to gain the most among emerging markets amid US economic policy shift

Mumbai: With the United States shifting its economic stance, emerging markets are poised for a significant rally, and India stands to gain the most with robust foreign institutional investors (FII) inflows returning into its markets, a new report said on Wednesday. There is a paradigm shift in global economic dynamics driven by the US administration’s evolving fiscal and monetary policies. This transformation will shape investment opportunities, urging investors to navigate the changing landscape with strategic foresight,” said Emkay Global Financial Services in its ‘India Strategy Report’.

As capital moves away from dollar assets, India’s strong economic fundamentals, supportive policy environment, and attractive valuations position it as a prime beneficiary of global capital flows, the report noted. India’s markets are set to extend their 4.5 per cent rally, fuelled by strong foreign institutional investor (FII) inflows. “India is poised to benefit significantly from this global economic realignment. A weaker dollar and declining US bond yields are expected to drive foreign institutional investor (FII) inflows into Indian equities,” said the report. Additionally, India remains resilient with strong fiscal and monetary support, making it an attractive investment destination. Emkay anticipates a sustained rally in Indian markets as global capital shifts toward non-dollar assets. “Investors are advised to focus on domestic consumption, investment, and capital goods sectors while reducing exposure to businesses reliant on US markets,” the report maintained. Banks and NBFCs are expected to lead the rally. The correction in Small and Mid-cap (SMID) stocks appears to be over, signalling further upside potential. Domestic discretionary spending and capital investments are likely to see strong growth. The Trump administration is implementing a strategic shift in economic policy, moving from a “loose fiscal and tight monetary policy” to a “tight fiscal and loose monetary policy” framework.

This shift aims to address macroeconomic imbalances and reassert US dominance in global GDP (24 per cent), market capitalisation (70 per cent), and its reserve currency status. The administration’s approach includes fiscal tightening, tariff escalations, and strategic economic realignments, positioning the US for long-term sustainability, according to the report. “As the US recalibrates its economic strategy, India stands to attract significant foreign investment, benefiting from a weaker dollar and lower bond yields,” it added.