MSCI India Underperforms Since September 2024 Peak

According to the latest GREED & Fear report by Chris Wood of Jefferies, MSCI India has underperformed the MSCI Emerging Markets Index by 41% on a total-return basis since peaking around September 2024.

The report states that MSCI India has remained broadly flat in rupee terms over the same period but declined 8% in U.S. dollar terms. The relative underperformance versus the broader emerging markets benchmark forms the backdrop to recent portfolio changes, as per the report.

AI Seen As Both Risk And Opportunity

The GREED & Fear report notes that while global investors are focused on the risks artificial intelligence could pose to India’s IT services industry, policymakers in New Delhi are also concentrating on opportunities within the AI value chain.

The report states there is broad acknowledgement that the IT services sector faces potential disruption and may need to pivot towards enterprise AI consulting. It adds that this transition could imply slower revenue growth and fewer jobs in traditional outsourcing roles.

The report cites partnerships such as the tie-up between Infosys and Anthropic as part of this strategic shift.
In the Union Budget presented on February 1, the Government announced a 21-year tax break, valid until 2047, for eligible cloud service providers establishing data centres in India for global operations, according to the

GREED & Fear report.

The report also talks about how big tech companies are promising to invest. By 2030, Amazon will invest $35 billion in India, Microsoft will invest $17.5 billion, and Google will invest $15 billion over the same time period.

Portfolio Changes Announced

Reflecting these developments, the GREED & Fear India long-only portfolio has undergone changes. Home First Finance has been replaced with Adani Power. Le Travenues Technology (Ixigo) has been replaced with InterGlobe Aviation. Lemon Tree Hotels has been replaced with Indian Hotels Company. Exposure to ABB India has been increased by 1%, funded by a reduction in PolicyBazaar.

The report says that India's main problem is still its relative position in emerging markets. With MSCI India trailing the MSCI Emerging Markets Index by 41% since its September 2024 peak, the portfolio adjustments reflect tactical recalibration in response to that divergence.