Why India may miss the next Asia rally: Nomura’s Chetan Seth

Chetan Seth, Asia-Pacific Equity Strategist at Nomura outlines how Korea and Taiwan could outperform on strong AI-driven earnings, while India’s performance will depend on energy stability and foreign inflows. Seth also breaks down the recent FII outflows, the role of the rupee, and why global capital is rotating toward tech-heavy markets.

Chetan Seth, Asia-Pacific Equity Strategist at Nomura, says India’s market outlook hinges on two critical global variables—oil prices and the trajectory of the artificial intelligence (AI) driven tech cycle. While a de-escalation in geopolitical tensions could support broad-based rallies across Asia, he cautions that India may struggle to outperform peers unless both energy and tech dynamics turn favourable simultaneously.

Seth adds that foreign investor flows into India remain tightly linked to global risk sentiment, currency stability, and relative opportunities in tech-heavy markets like Korea and Taiwan. A sustained ceasefire and normalisation in oil flows could bring capital back into Asian equities, including India, but near-term performance will likely remain aligned with the broader region rather than leading it.

Watch the full conversation here or scroll down for edited excerpts from the interview.These are edited excerpts from the interview.Q: You downgraded Indian equities in early April. Your report says India is vulnerable to high oil prices, but also notes markets look oversold and de-escalation could ease oil. How do you reconcile this?

A: It’s important to understand what the downgrade means. As a regional strategist at Nomura, most of our investors are regional. Moving India from overweight to neutral simply means we expect India to perform broadly in line with regional markets.

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The thesis is straightforward. If the war de-escalates and oil flows normalise through the Strait of Hormuz, all Asian markets will rally. But some, like Korea and Taiwan, could rally more. India may rise, but it’s hard to expect outperformance. The key variable remains the trajectory of the war, a sustained ceasefire, and energy flows.

Q: In Asia-Pacific, you are overweight in Korea and China. Are these your key bets?

A: For Korea, the case is strong earnings growth. Expectations for 2026 are around 150%, with another about 20% growth next year. Numbers are being revised upward frequently.

Recent results, like Samsung’s, were ahead of consensus. Valuations are still attractive at 7–8x. If earnings materialise, there’s meaningful upside. Our tech analysts are also very bullish on the artificial intelligence (AI) cycle, and even our current estimates may be conservative.

For China, valuations are modest. Compared to India, China is more resilient to disruptions in oil and energy flows.

For India, two calls are critical:

Energy (linked to the war)

The AI and tech cycle

If you are bullish on AI and tech and expect oil to fall, India could struggle. But if the tech cycle weakens and energy normalises, India could outperform.

Q: Are Korea and Taiwan overly dependent on tech and AI? Are they ‘one-trick ponies’?

A: To some extent, yes—but markets are what they are. If that “one trick” is working, investors follow it.

That said, Korea’s rally last year wasn’t just a memory. Defence, transformers, medical, beauty, and entertainment stocks all performed well. There was also a strong theme around energy storage systems (ESS).

Looking ahead, however, the Korea bull case is increasingly dependent on memory stocks, which make up about 55% of MSCI Korea. If that call goes wrong, Korea could struggle—but that’s not our base case.

Taiwan is even more tech-heavy, with about 80–85% linked to tech or AI. Nearly every company is leveraged to the AI theme in some way.

Q: What explains the recent aggressive foreign institutional investor (FII) outflows from India? Do you expect this to reverse?

A: It largely depends on the war. There are still binary risks, though recent developments are encouraging.

If stability returns, Asia will see inflows—and India will too. India has seen $16–17 billion in outflows year to date (YTD); Korea ~$30–32 billion; Taiwan about $14–15 billion. That capital is sitting on investor books and can return if conditions stabilise.

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India’s underperformance is simple: investors are finding better opportunities elsewhere, particularly in tech. Since active emerging market (EM) funds aren’t seeing strong inflows, investors rotate capital—they sell one market to buy another.

The rupee is also a factor. It’s a chicken-and-egg situation:

If flows improve, the rupee stabilises. If outflows persist, the rupee weakens, pressuring equities further.

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(Edited by : Unnikrishnan )