India Equity Update July 2026

India equity update: valuation reset meets changing backdrop Exhibit 1 – Valuation reset: India is cheap versus its own history and versus peers

India trailing P/E relative vs EM index

India trailing P/E relative vs World (ACWI) Anand Gupta Lead Portfolio Manager India trailing P/E vs historical average India has just come through one of its weakest MSCI India trailing P/B vs stretches of relative performance in three decades. historical average Against the broad emerging market index, Indian equities have lagged by roughly 37% over the past -30% -25% -20% -15% -10% -5% 0% Discount to own history/to peers (%) year – sitting at close to all-time lows – and the long- standing objection that “India is always expensive” Source: AllianzGI, 2026. Index data via Bloomberg, as of June 2026. has lost much of its force. MSCI India now trades at a clear discount to peers and to its own history, around 26% below emerging markets and 21% below the -14% -37% MSCI India trailing P/E 1-yr relative vs EM — broader MSCI All Country World index on trailing vs its long-run average near a record low earnings. This is roughly 14% below its own long-run historical average and modestly below average on ~7.8% ~2x price-to-book, too – its once-hefty valuation premium Real GDP growth, FY26 power capacity sharply compressed. YoY (early 2026) additions vs FY25

INDIA EQUIT Y UPDATE: VALUATION RESET MEETS CHANGING BACKDROP

The macro picture is quietly turning The investment cycle is broadening across industries Beneath the weak price action, the real economy has proved more resilient than the headlines implied. Growth registered The long-awaited handoff from public infrastructure close to 7.8% year-on-year in early 2026, holding up through spending to private capital expenditure is finally underway, global tariff noise and the oil spike that accompanied the with corporate loan approvals starting to accelerate. Two West Asia conflict. That resilience reflects years of monetary growth engines look particularly important, with structural and fiscal consolidation that have left India structurally rather than cyclical impact. sturdier than in previous episodes of global stress, with credit growth and purchasing managers’ indices (PMIs) staying We believe power is the most obvious beneficiary: capacity firm even as energy prices rose. With the subsequent US–Iran additions in FY26 ran at roughly double the prior year, with agreement and the reopening of the Strait of Hormuz, crude transmission being the binding constraint. We see this as a has eased, inflation sits comfortably within the Reserve Bank multi-year opportunity for transmitting electricity using direct of India’s (RBI) target band, and the currency has steadied. current at very high voltages instead of more traditional The external picture, in short, has substantially improved, in currents used in most power grids today. Indeed, global our opinion. majors are expanding Indian transmission capacity, while sector capex is projected to more than double towards A liquidity tailwind is building US$280bn over the second half of the decade.2

Policy is adding a further, more deliberate impulse. The Defence is the second: defence-related exports have reached Reserve Bank of India’s reintroduced FCNR(B) deposit record levels, as domestic production is now being mandated scheme – similar in intent but structured more generously rather than merely encouraged through an expanding list than its successful 2013 predecessor with the central bank of import bans. We see higher and rising capital outlay absorbing the hedging cost – is designed to channel a wave pointing to a durable build out rather than a one-off, with of foreign-currency inflows into the system over the coming defense offering staying power given its particular role at months. Broker estimates for the combined deposit and the intersection of industrial policy, supply chain security and external-commercial-borrowing response vary widely, but the technological upgrade. direction is unambiguous, and India’s diaspora is roughly 70% larger than it was in 20131, widening the investor pool. Inflows Layered on top is a broader digital dimension that is easy of…