RBI rate cuts, reforms to support India's growth in 2026: Invesco Report

NEW DELHI: India's outlook for 2026 improved amid geopolitical challenges due to ongoing reforms and optimism in the US-India relations, said a report by Invesco Strategy & Insights.

In its "2026 Annual Investment Outlook Resilience and rebalancing", Invesco mentioned that despite equity market underperformance amid geopolitical tensions, we are cautiously optimistic on India in 2026, due to ongoing reforms and signs of stabilization and room for potential improvement in US-India relations.




"We expect India to remain the world's fastest growing large economy, with growth modestly accelerating on Reserve Bank of India (RBI) rate cuts. Domestic economic reforms remain crucial for raising trend growth and for long-term resilience, in our view. We expect gradual progress given political constraints," the report said.

However, in terms of Emerging Market (EM) Equities, Invesco report said the EM equities have the most attractive valuations relative to other regions, albeit with wide variation within EM. "We anticipate Chinese stocks to continue to outperform while India may struggle."

We expect a weaker USD and better growth outside of the US to support performance of non-US assets, especially emerging market (EM) equities and EM debt.

The report further mentioned that the global financial markets are poised for continued gains in 2026, supported by resilient private-sector balance sheets and a shift toward broader market leadership.

The report highlighted that the lower US policy rates and greater fiscal spending in Europe, Japan, and China should lead to an improved global growth trajectory next year, and higher global equity markets.

"With many major central banks on hold, Fed cuts should contribute to a soft dollar environment. Falling costs for hedging US dollar (USD) exposure are likely to encourage investors to increase hedge ratios and exert downward pressure on the dollar," it said.

The outlook points to a rebalancing of investment opportunities. While U.S. equities, particularly large technology and artificial intelligence-related stocks, remain expensive, Invesco sees more attractive valuations in non-U.S. markets, smaller-capitalization stocks and cyclical sectors.

A pickup in global activity could support broader market participation and reduce concentration risks tied to mega-cap technology shares.

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