According to Mark Matthews of Julius Baer, a fresh Fed rate-cut cycle, more robust domestic policy support, and a recovery in profitability might entice international investors to return to Indian markets.
Mark Matthews, Head of Research – Asia at Julius Baer, stated that the central bank’s projections “frequently shift” and that the policymaker has already loosened its once-rigid two percent inflation target. Despite this, the US Federal Reserve’s dot plot has only penciled in one rate cut for 2026.
The pro-growth policies—RBI rate cuts, GST adjustments, income tax relief, loosened reserve requirements, and S&P upgrades—as well as the prospect of double-digit corporate earnings the following year can pave the way for foreign institutional investors (FIIs) to reenter India after more than $15 billion outflows this year, Matthews said.
Setting the stage for the reintroduction of FIIs
Matthews blamed last year’s worse growth and profitability on the current flight of foreign investors. He said that a settlement of the trade tensions between the US and India will improve mood and that “we should see greater profits ahead with policy support and strengthening fundamentals.”
Industries to Keep an Eye on
Even though Matthews sees a contrarian opportunity in IT, his favored investments are still banks, consumer plays, and infrastructure. This year, the industry has fallen behind banks by almost 30%. Since they have historically moved in opposition to one another, it will be notable if the trade disputes between the US and India subside.
India is lagging behind in the global AI race
Matthews warned that, in contrast to China or the US, where artificial intelligence (AI) bets are generating investor interest, India “just lacks a large-scale AI narrative.” Nevertheless, said that the conditions are favorable for a resurgence of foreign interest, with inflows probably increasing gradually rather than suddenly.