Emerging Markets Rising 2.0
- Panna Bhandari
- Apr 16
- 3 min read
Why India Is Poised to Lead in a Post-U.S. Peak World: How macro trends, commodity cycles, and shifting capital flows point toward India’s next big breakout.
A Global Lens: Why Macro Matters?
Macro isn’t about predicting the future — it’s about understanding the big picture. It connects the dots between bonds, equities, commodities, inflation, and currencies to explain why asset prices move the way they do.
Using macro as a framework helps identify where we are in the global cycle — and how that impacts sectors in India, stock selection, and long-term capital allocation.
In an interconnected world, macro is no longer optional — it’s essential.
1. India and the Commodity Supercycle
One of the most important relationships we track is the correlation between the Thomson Reuters Commodity Index and the Nifty 500 in USD terms.
The orange line represents the commodity index — a basket of 19 global commodities. The blue line is Nifty 500 in USD terms, reflecting actual returns for international investors.
From 2003 to 2008, both were in a structural bull phase. In 2009, both bottomed almost simultaneously.
Since then, commodities entered a bear market. And while Indian markets grew in INR terms, in USD terms, it mostly moved sideways.
But COVID changed that. Both indices bottomed in 2020 — marking the start of a new commodity supercycle. For economies like India and China, this is structurally bullish.
2. Where Are We in the Indian Growth Cycle?
If we look at valuations using the Nifty PE ratio, India currently trades in a comfortable range of 20–24 — not cheap, but not frothy either.
Corporate earnings have supported the rally from 2022 to 2025, in contrast to previous periods when price led fundamentals.
3. When the U.S. Tops Out, India Steps Up
Historically, when U.S. markets peak and enter long-term bear phases, capital rotates toward emerging markets.
Between 2000 and 2008, U.S. markets returned nearly 0%. India dropped 49% initially but rebounded to deliver 6x returns.
When smart money exited emerging markets post-2009, India moved into a long sideways correction. But that trend could now reverse.
4. Can India Absorb a U.S. Shock?
The answer is increasingly: yes.
During the recent tariff-driven correction, U.S. markets fell 16%, while India fell only 4%. That’s a sign of growing divergence — and resilience.
If we break out of the long-term ratio range, India could start structurally outperforming.
5. The Copper-Gold Ratio: A Macro Trigger
We track the Copper-Gold ratio closely. Copper represents industrial activity, while gold is a safe haven. When copper starts outperforming, manufacturing economies thrive.
This ratio bottomed alongside Indian markets in 2020. It appears to be bottoming again — often a reliable lead indicator.
6. Emerging Markets: Still Deeply Undervalued
Emerging markets are still down 30% from their 2008 highs — in dollar terms.
Meanwhile, India has grown 3–4x in rupee terms over the same period. Now, with the dollar weakening, this outperformance may finally become visible in USD terms.
Markets don’t stay suppressed forever. After 17 years of underperformance, the odds of a bottom are rising.
7. China: A Case Study in Global Shock Absorption
In 2015, China dropped 53%, India fell 25%, and the U.S. dropped 17%. But in the years that followed, India and the U.S. tripled — while China didn’t recover.
Lesson? Even if a major economy crashes, global markets move on — and capital rotates quickly.
India’s ability to absorb shocks is improving every cycle. That’s a structural evolution.
8. A Shift Within India: From IT to Manufacturing
The Nifty Tech Index has stopped outperforming. That’s important.
We’re seeing money move from service-led businesses to core sectors — metals, power, energy. This internal shift aligns with the global move from developed countries towards manufacturing oriented Emerging Markets.
Conclusion:
Every major recession resets the system. And when the dust settles, capital looks for new leadership.
This time, it’s likely to come from emerging markets — particularly India and China.
India is backed by a new commodity cycle, a weakening dollar, and interest rates that support — not suppress — economic expansion.
The only real macro risk? A sharp decline in crude. But even that would present a generational buying opportunity.
So yes, the U.S. may wobble, and we might feel the tremors — but India is not just surviving; it’s learning to lead.
For Capital 8
CA Sharad Daga
CFP Panna Bhandari
