India stocks cheapest in six years as Korea beats Sensex by 65 points: Is a reversal coming?

Indian stocks may be approaching a turning point after a prolonged period of underperformance, with valuations at their cheapest in more than six years even as South Korean and Taiwanese equities have surged on the back of the artificial intelligence (AI) boom.

According to CLSA's Bits & Pieces report dated November 6, 2026, India and China rank among the worst-performing major global equity markets year-to-date, while Taiwan and South Korea have emerged as leading outperformers.

The divergence has become particularly striking. South Korea's Kospi has outperformed the Sensex by more than 65 percentage points in 2026, while Taiwan's TAIEX has beaten China's H-Share index by approximately 60 percentage points.

CLSA's commentary suggests this widening gap may have become excessive, potentially creating an opportunity for investors to diversify profits from North Asian markets into India and China.

Why are Indian stocks looking attractive?

One of the biggest arguments supporting Indian equities is valuation.

The report notes that Indian stocks are trading near their lowest price-to-earnings (P/E) multiples in six years, following a prolonged correction and foreign investor selling.

A bullish investment scenario reproduced in the report places India's forward valuation at approximately 17.6 times earnings, alongside potential large-cap earnings growth of around 11%.

This suggests that investors may not need an aggressive earnings recovery to generate positive returns if corporate profits improve and valuations stabilise.

However, cheaper valuations alone do not guarantee an immediate market rebound.

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Could the AI boom become India's advantage?

India's limited exposure to semiconductor and AI hardware companies has been a major reason for its underperformance against Taiwan and South Korea.

Both markets benefited from strong investor interest in semiconductor manufacturers and companies linked to AI infrastructure.

But the same concentration could now create risks if global investors begin reducing their exposure to AI-related stocks.

The report includes an AI-generated bullish argument stating that India's limited semiconductor exposure could offer diversification to investors seeking to reduce concentration in North Asian technology stocks without exiting Asian or emerging-market equities.

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Can foreign investors return?

Foreign institutional investor flows could become another important trigger.

CLSA's India sales commentary estimates that foreign investors have withdrawn roughly $50 billion from Indian equities over the past two years.

A reversal in these flows could provide support to benchmark indices, particularly large-cap stocks.

The report also identifies Indian banks as a potential opportunity, highlighting depressed valuations and prospects for improving credit growth.

Is a market reversal coming?

The case for an Indian equity recovery rests on three developments: improving corporate earnings, renewed foreign inflows and a possible rotation away from expensive AI-linked markets.

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Lower crude oil prices could provide additional support to India's economy and corporate profitability.

However, the timing remains uncertain. A sustained recovery would require earnings expectations to materialise and investor confidence to improve.

For mutual fund investors, the valuation reset may strengthen the case for maintaining systematic investment plans rather than attempting to predict the market bottom.

The central question is whether India's relative valuation advantage will translate into stronger earnings and sustained investment inflows. Until then, the possibility of a reversal remains an investment thesis rather than a confirmed market trend.