India's premium over EMs is shrinking, but still above 2021 level. What it means?

India's valuation premium over MSCI Emerging Markets has narrowed to 75% in 2026, down from 119% last year and a post-pandemic high of 164% in 2024, though still above the 65% level seen in 2021. MSCI India has declined about 2% over the past year while MSCI EM and MSCI World have risen 38% and over 20% respectively, with foreign investors remaining underweight. Fund managers believe the case for renewed FPI inflows is strengthening as India's valuations become more reasonable and earnings momentum improves into FY27.