CLSA turns positive on India, says TINA trade is making a comeback

Detailed summary

CLSA says India is once again attracting global investors as the "India TINA trade" returns, with the brokerage turning relatively positive on the market. It expects one final RBI rate hike in December before inflation peaks at around 6.25% and growth moderates in the second half.

Global brokerage CLSA has turned relatively positive on India, citing a return of global investor interest and the revival of the "India TINA (There Is No Alternative) trade."

"We turned positive sometime around around early April, and that was still more absolute positive. I would say that sometime over the last week or 10 days, we've turned relative positive as well," said Vikash Kumar Jain, India Strategist & Head of India Research at CLSA, speaking at the CITIC CLSA India Forum.

He said India has started outperforming other emerging markets again as investors diversify beyond the artificial intelligence (AI) trade.

"Just imagine, this quarter itself; it's been not even half of the quarter gone, we've seen India outperform EM by almost 25 percentage points in just six weeks," he said, adding that investors are once again looking at India as a diversified market opportunity.

While India may not have many listed AI-focused companies yet, it remains well placed because of its talent pool and the expansion of Global Capability Centres (GCCs). He expects AI adoption to improve productivity over time, with the biggest beneficiaries likely to be companies that successfully deploy AI rather than firms directly building AI technologies.

Nikhil Gupta, India Economist at CLSA, said inflation is expected to peak at around 6.25% in December, while GDP growth is likely to moderate to around 6% in the second half of the fiscal year, with the March quarter potentially slipping below that level.

The brokerage expects the Reserve Bank of India (RBI) to deliver one final rate hike in December, with inflation likely to peak before easing in early 2027. "We are working with only one rate hike... in December," he said, adding that weaker growth and easing inflation should reduce the need for further tightening after that.

"Inflation... will move above 5% and close to 6.25% in December, which will be the peak month," he said.

Gupta said the first half of the fiscal year benefited from…

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