BlackRock sees India's equity market as 'over-punished', remains constructive

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India's equity market has been "over-punished" for lacking a direct artificial intelligence (AI) play and for its exposure to rising oil prices, according to BlackRock, which said record foreign outflows and a tougher macroeconomic environment have not undermined the country's medium- to long-term investment prospects. Natasha Sarkaria, EMEA investment strategy lead of wealth at BlackRock, was quoted by Reuters as saying on Wednesday that the world's largest asset manager remains constructive on India, though not at an "outright overweight" position. With more than $14 trillion in assets under management globally, BlackRock views India as one of its highest-conviction medium- to long-term emerging market opportunities, supported by favourable demographics, infrastructure development, financial sector strength and indirect AI-related opportunities. "As long as India's GDP grows between 6% and 7%, that's a nice sweet spot for the economy to keep growing, keep expanding," Sarkaria said, as per Reuters.

Oil prices, foreign outflows weigh on sentiment

BlackRock's comments come at a challenging time for Indian markets. The country's earlier combination of strong growth and relatively benign inflation has been disrupted by the Iran war, which has pushed up oil and gas prices, weakened the rupee and increased concerns over broader supply disruptions. India, the world's third-largest oil importer, has also seen its market capitalisation fall behind AI-driven markets such as Taiwan and South Korea as investors shifted towards semiconductor and chipmaker stocks. So far in 2026, the benchmark Nifty 50 and Sensex have declined 11% and 13%, respectively. However, Sarkaria argued that the market rotation away from India has been excessive. "It doesn't mean there are no derivative AI stories in India," she said, adding that "as long as there is momentum behind keeping inflation under control and enough growth to absorb a tougher oil environment, that's okay for us." India's economy grew 7.8% in the March quarter, beating expectations, while the Reserve Bank of India recently lowered its FY27 growth forecast to 6.6%-6.9% and announced measures aimed at supporting the rupee amid rising oil costs and continued foreign fund outflows.

Financials among preferred sectors

BlackRock remains positive on Indian financials, industrials, materials, utilities and consumer discretionary stocks. The asset manager is particularly bullish on the financial sector, citing strong credit growth at domestic banks, attractive valuations and potential support from recent RBI measures. Sarkaria did not provide a 12-month target for Indian benchmark indices but said BlackRock expects low double-digit earnings growth for the MSCI India index this year. She cautioned that markets could remain volatile in the near term as higher oil prices, a weaker rupee and rising input costs affect corporate profitability over the next two quarters. However, BlackRock continues to see India as a compelling long-term investment destination despite current headwinds.

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