BlackRock on PM Modi's India, stock market outlook & more

BlackRock Investment Institute in its Global Outlook 2026 note said India is a clear example of how major structural forces are reshaping economies and markets, from demographics and digitalisation to the energy transition and supply-chain realignment. Policy continuity under Prime Minister Narendra Modi’s third-term coalition is adding stability in India, while ongoing reforms are broadening the domestic investor base and strengthening the role of capital markets in financing growth, BlackRock noted.

"We think India offers one of the most compelling opportunities across emerging markets for long-term investors looking to tap into mega forces. We favor above-benchmark allocations to Indian equities within strategic portfolios with investment horizons of five years and beyond," BlackRock said.

It said demographics are India’s greatest long-term strength, with a large and expanding working-age population, unlike many major economies, boding well for sustained gains in productivity and consumption. It also sees India as a potential beneficiary of heightened geopolitical fragmentation that benefits multi-aligned and connector countries.

With a growing workforce, rising investment depth and a low representation in global benchmark indices relative to its economic size, Indian markets, BackRock said warrant an above-benchmark allocation on a five-year and longer strategic horizon.

"India remains a durable contributor to global growth. Output is approaching $4 trillion, and real growth is projected at 6–7 per cent annually through the end of the decade, according to IMF estimates — a path that could see India overtake Japan and Germany to become the world’s third-largest economy by 2030. The near-term geopolitical backdrop bears watching, including India’s management of ties with both the US and Russia," it said.

BlackRock said Indian stock market's forward price-to-earnings ratio remains above emerging market (EM) averages but are supported by India’s stronger nominal growth outlook. 

"We estimate India’s equity risk premium, our preferred valuation gauge since it considers both earnings growth expectations and prevailing interest rates, to be around 4.3 per cent, close to its long-term average," BlackRock said.

It finds Indian equities under-represented in global benchmarks. They constitute roughly 1.7 per cent of the MSCI ACWI index even as the economy accounts for about 7 per cent of global GDP. 

India’s improving macro stability and credit quality offer income and diversification at a time when developed market bonds provide less ballast, it said. Among emerging markets, BlackRock said it favours selective exposure to tech and themes linked to AI and the energy transition across EM and China. The rewiring of supply chains is benefiting countries like Mexico, Brazil and Vietnam, it said.

"In our strategic investment views of five years and beyond, a preference for above-benchmark allocations to Indian equities drives a broader overweight to EM equities. India’s young and expanding workforce, rapid digitisation and resilience in a fragmented geopolitical landscape bolster its long-term growth prospects, we think," it said.