Speaking from the side-lines of the Morgan Stanley Investor Forum 2026, Garner Said, “The Indian economy has been resilient and corporate earnings outlook is, I would say, reasonable here. It’s sort of a mid-teens year-on-year outlook here, but it’s very difficult to compete against the scale of the earnings growth that the North Asian markets are able to deliver in this environment.”
He added North Asian markets are benefiting from a powerful AI-driven cycle that is leading to sharp upgrades in earnings estimates, particularly for semiconductor and memory-chip companies. Morgan Stanley’s preferred markets are Japan, Brazil and Singapore.
Garner said, “The passive allocations that will essentially follow the benchmark are mechanically forced to be buying more Taiwan and Korea, where the earnings story is strongest, and to sell India and China, where the earning story is less good.”Read Here | Foreign investors still backing quality Indian IPOs: Citi
The shift in benchmark composition has been significant. China’s share in the MSCI Emerging Markets Index, which peaked at around 45% in early 2021, has nearly halved and the country has slipped to third place. Taiwan is now the largest market in the index, followed by South Korea, while India has fallen from the second-largest position to fourth, with a weight of roughly 12%.
Garner noted that although India’s market initially benefited from investors reallocating capital away from China, both India and China are now facing pressure as Taiwan and South Korea continue to gain market share. Together, the two North Asian markets now account for nearly half of the MSCI Emerging Markets Index, a record high.
The strategist added that rising crude oil prices are another challenge for South Asian economies, including India, as higher energy costs could hurt growth and fuel inflation.
Despite the near-term headwinds, Garner remains constructive on India’s longer-term prospects. He believes the country could benefit from wider adoption of artificial intelligence, especially in sectors such as financial services and other service industries where AI tools can help improve productivity and profitability.
Also Read | Kotak’s Nilesh Shah calls for easier access to India for global investors through GIFT CityFor the entire discussion, watch the accompanying video
