According to Dheeraj Gaur, Chief Investment Strategy Officer at Choice Wealth, Indian equities have corrected after months of volatility and foreign selling, but the country still trades at a clear premium to most emerging markets. As reported by NDTV Profit, the Nifty now trades at about 17.5 times one-year forward earnings, below its 15-year average of around 19.6 times. India's premium over other emerging markets has also narrowed to a 10-year low, making the market certainly cheaper than it was previously. However, Gaur emphasizes that 'cheaper' does not mean 'cheap' - India remains one of the most expensive emerging markets compared to its peers, with investors still paying more for every rupee of Indian earnings than for the average emerging market.
Despite the premium valuations, Gaur believes the premium is justified by India's strong fundamentals. According to the interview with NDTV Profit, GDP grew 7.8% in the April-June quarter, and Q1 FY27 corporate profits grew 17% excluding oil and gas. He notes that the premium has to be earned every quarter, and if earnings slow, the premium can shrink. The correction has improved the risk-reward equation, especially in large caps, with future returns expected to come from earnings growth rather than valuations expanding again. Investors are advised to use market dips to build positions gradually in quality large caps while staying selective in small caps, where valuations still run ahead of fundamentals. However, the strong MF retail inflows into mid- and small-caps are likely to keep valuations ahead of fundamentals for some more time.
The US technology sector is experiencing unprecedented spending levels, with the Nasdaq rising to 27,244.28 on September 22, its first record close since June, led by AI names. The spending behind this growth is equally remarkable, with the five largest US cloud providers on track to spend $650-$690 billion on capex in 2026, close to double the previous year. As reported by NDTV Profit, AI capex has increased dramatically from 33% of hyperscalers' operating cash flow in 2023 to an estimated 93% in 2026. Gaur expresses concern about the financing and return on this massive spending, noting that when capex absorbs almost all internal cash, any disappointment in monetisation can trigger a sharp de-rating. The medium-term picture could be different, with a correction potentially easing AI euphoria and redirecting global allocations toward consumption-led broader markets like India.
Indian IT has been significantly impacted by AI-related concerns, losing around 24% year-to-date as investors feared AI would outsource revenue. According to NDTV Profit, the sector has been the 'non-AI trade' of 2026, with capital draining out of Asia and into the US AI boom. However, a correction that cools AI euphoria could reverse these trends, easing disruption fears and redirecting global allocations toward consumption-led broader markets like India. The Nifty IT index surged 4.02% on September 15 after leading AI executives called for a slower pace of development, providing a preview of potential recovery. Indian IT valuations have already reset significantly, with a depreciating rupee supporting margins, and the sector is preferred among companies with visible AI-led deal wins and differentiated mid-tier players. The swing factors are US discretionary tech spending and how fast Indian firms convert AI into billable services.
