Are the clouds clearing for Indian equities?

By Chris Salih on 19 June 2026 in Asia/Emerging Markets, Investment Trusts

For a number of years India was the worst kept secret in the equity market. Strong demographics, growth, few geopolitical concerns, strong corporate governance, and the growing online economy all come to mind.

A guide to the Ashoka India Equity Investment Trust

Please note: This interview took place on 12 June 2026 amid news of a potential peace deal between the US and Iran. Please be aware that events have changed quickly and some of the views and holdings may have changed since the interview took place.

Prime Minister Narendra Modi was elected in 2014 and set about transforming the country – including economic and financial reforms, digital transformation and financial inclusion (formalised the banking system to encourage savings, for example). Railways, roads, airports, ports and defence have all improved exponentially under his tenure.

But the market was hot. The MSCI India index rose 260% between 2014 and 2024* and the average premium for MSCI India over MSCI Emerging Markets stood at roughly 80% between 2021 and 2024 (it was over 100% at some points)**.

However, a host of challenges have hit the world’s sixth-largest economy in the past couple of years. While global equities have risen 34.3%, Indian equities have lost 15.2%***. Approximately $18 billion was withdrawn from India’s equity market in 2025 alone, which materially contributed to the market’s underperformance relative to its peers****.

These headwinds have ranged from wrangling over US tariffs, to India’s lack of leading AI plays. There were signs of a pick-up in the first couple of months of this year, with manufacturing activity expanding and industrial power growing. Official data later showed that Q1 2026 recorded 7.8% GDP growth, stronger than many economists had expected^.

However, war in the Middle East has put India on the back foot again. Net oil imports account for about 3.1% of India’s GDP^^. The impact of the war ranges from higher petrol prices, expensive goods, inflation and increased pressure on India’s import bill and fiscal balance. When Modi is telling people to travel less, it gives off the impression that this is a major problem which the government cannot immediately address.

“India trades on a P/E of 18.5x now while the forward P/E on the BSE Sensex has averaged at 20.7x since 2014. We’ve also seen a sharp pull back from an 80% premium over EM to a 60% premium. The opportunity is there relative to history.

That’s the view of Ashoka India Equity Investment Trust portfolio product specialist and macroeconomist Dipojjal Saha. Launched in 2018, Ashoka India Equity (AIE) aims to achieve long-term capital growth by investing in Indian companies of all sizes. The trust adopts a bottom-up stock-picking approach to target scalable businesses with sustainable superior returns on capital. The trust has a bias towards mid and small-caps and is managed by the team at White Oak Capital, which consists of over 40 analysts with a strong, on-the-ground presence in the Indian market. Lead manager Prashant Khemka is the founder of White Oak, having previously been CIO and the lead portfolio manager for the Goldman Sachs India and Emerging Markets Equity strategies.

Since its launch in 2018, AIE has produced exceptional returns for investors (see performance section).

Investment Process

The investment process on this multi-cap vehicle is centred around bottom-up stock selection, allowing the huge in-house research team at White Oak to scour the entire investment universe of some 800 companies (with a market cap in excess of $600 million) to find well managed and scalable businesses with superior returns on capital and good governance, at a price that is at a discount to what the team see as its intrinsic value.

The initial universe of 800 companies is screened for factors like poor governance and other weak characteristics; as well as targeting firms which are alert to structural changes which can benefit their business. This brings the potential number of companies down to around 200, which the team then analyse in depth. The team then target businesses they believe are attractively valued when building a final portfolio – they use a valuation model called OpcoFinco to make sure they are not overpaying for a stock.

The final portfolio currently holds around 150 names, with the team recently gaining approval to increase the number of holdings (previously 50-100) to improve their ability to generate alpha.

Why now for this portfolio?

• Performance has been incredibly strong since launch – returning 135%, compared with 86% for its benchmark^^^ – this performance has come at a time when small-caps have underperformed in four out of the eight calendar years since AIE launched (annualised return of 15%)**.
• Volatility has created a 4.16% discount on the trust – it has typically traded on a premium over the past five years^^^^.
• Valuations across Indian equities have come down to attractive levels (forward P/E premium of 62.7% over emerging markets is low given it has averaged 80% between 2014 and 2024)
• AIE has a strong team in India, allowing them good access to the growing SMID-cap and late-stage pre-IPO space.
• Fee structure that aligns the interests of management with investors.
• Hopes of a ceasefire between the US and Iran would be majorly beneficial given there were green shoots for the economy at the start of this year following a difficult 2025.

Manager’s View

Dippojal says any news of a potential ceasefire between the US and Iran is clearly good news – but particularly for India given its status as a major oil importer. He says if the war stops and the bottleneck of the Strait of Hormuz is opened up, then oil prices will cool immediately. However, he expects further news flow to be volatile.

Prior to the outbreak of war, the start of 2026 was actually producing positive news for India after a challenging 2025. The government announced cuts, including Goods & Services Tax (GST) reductions – the government implemented a simplified two-rate GST structure of 5% and 18%, abolishing the 12% and 28% brackets.

Dippojal says: “These policies had started to show through in terms of higher consumption, more reforms were taking place and most importantly India had signed a trade deal with the EU as well as the US.”

India’s annual exports to the EU stand at $75 billion, compared with $85 billion to the US. The full trade agreement offers potential upside for labour-intensive sectors with zero tariffs for textiles, leather, seafood, gems and jewellery. Dippojal says it is a good move for both India and the EU given they are being squeezed by China and the US respectively.

Dippojal says 2025 was a slowdown year for the Indian economy, but says real GDP growth of 6-7% is still good in a global context.

“Everything petered out due to the AI trade, with India seen to be on the opposite side of that. Secondly, there was a cyclical slowdown from the highs seen from earnings upgrades in Indian small and mid-caps as well as an IPO boom between 2022 and 2024,” he says.

The team says there were no concerns following the end of the last fiscal year – with earnings on track amid mild downgrades of 1-2%. Dippojal says the situations look manageable on the ground – provided supply chains are not hampered for another three months or so.

However, he says news of the war potentially ending leaves India in a far better place with attractive valuations relative to its own history and other emerging markets. Crucially, he believes small and mid-caps can benefit from the breadth of opportunities in India. He says:

Portfolio activity

AIE has been reducing exposure to information technology, given the impact of AI on the market, specifically the IT services industry. Names cut include Tata Consultancy Services. Dippojal acknowledges the unknown impact of AI on the outlook for this sector, but says a lot of concern has already been priced in and that there will be new areas of opportunity to compensate for AI disruption. He adds that many large global businesses have IT services in India and that the traditional sector will not be wiped out by AI.

Dippojal says India does not have a clear AI leader like TSMC and therefore they are targeting ancillary plays like TD Power Systems, a leading manufacturer of AC generators and electric motors, which is linked to the growing capital expenditure in the data centre space.

By contrast, areas of focus include the likes of consumer discretionary, given recent government initiatives and the long-term outlook for the Indian consumer. Examples here include Tenneco Clean Air India, which designs and manufactures clean air and powertrain products for automotive applications.

TD Power Systems typically falls into the industrials bucket; others include MTAR Technologies which is linked to both defence and AI CapEx. They are also overweight healthcare, with holdings including Onesource Specialty Pharma, which is currently the third largest holding in the portfolio. Dippojal says it specialises in end-to-end development and manufacturing for biologics, drug-device combinations, sterile injectables, and soft gelatin capsules.

The team have also bolstered their exposure to energy companies – citing the volatility in markets and increased Capex spending on AI, which requires materials like copper. Names added here include Oil and Natural Gas (India’s largest upstream company), National Aluminium Company, Hindalco Industries and Petronet. The latter helps in the re-gasification of natural gases that come in from the likes of Qatar.

Recent turnover has been in line with historical figures. Removals have been largely down to valuations, although the reduction in technology names has also played a role.

India’s IPO market is cooling after record-breaking years, as global geopolitical tensions and market volatility prompted companies to pause listings. Dipojjal says they are still finding opportunities, but have yet to add to any names in 2026.

Performance

Performance has been incredibly strong since launch – returning 135%, compared with 86% for its benchmark^^^ – this performance has come at a time when small-caps have underperformed in four out of the eight calendar years since AIE launched (annualised return of 15.4%)**.

Over the past five years the trust has returned 54% on a share price basis (29% for the IT India/Indian Subcontinent sector), while the NAV has risen 61.8% (23.8% for the sector)^^^^.

Looking at the performance attribution analysis of AIE since its launch in 2018, we can see the strength of its focus further down the market-cap scale. Returns from small-caps since launch to the end of 2025 amounted to 103%, falling to 34% for mid-caps and 13% of total attribution for large-caps**.

What else do investors need to know?

Despite strong relative and absolute performance, geopolitical volatility – and a tough period for Indian equities in general – has seen AIE go into discount territory in 2026 (currently at a discount of 4.16%)^^^^. This could well be an attractive entry point, given the excellent stock picking ability shown by the management team since launch.

The trust may deploy up to 20% gearing of net asset value at the time of drawdown to seek to enhance long-term capital growth and for the purposes of capital flexibility and efficient portfolio management. Gearing currently stands at 6%^^^^.

The trust has a unique charging structure which is designed to increase the alignment of interest between investors and shareholders. The trust has no base management fee – meaning the team are only paid if the trust outperforms. The performance fee stands at 30% of the excess returns of the NAV per ordinary share and the MSCI India IMI benchmark (capped at 12% of NAV). The fee is also paid in shares to the team to ensure increased alignment of interests. The fee is based on performance relative to discrete three-year periods, the latest of which ended on 30 June 2024.

AIE paid its first dividend since inception in the last financial year ending June 2025. This is likely to be a single event, with the manager targeting capital growth through alpha-generating stocks. It should be viewed as a growth-oriented trust.

Outlook

Dipojjal says the focus always remains on bottom-up stock picking and finding companies which are both bear-market leaders in their respective sectors and have very strong balance sheets. “These attributes matter more than anything else in an uncertain environment,” he says.

India is still expensive, but is no longer the hot premium potato it once was. With a huge resource at its disposal, we like the trust’s unique approach to stock selection and their ability to go deeper into both the mid and small-cap markets. It is rare for AIE to be trading at a discount (a reflection of the stock picking capabilities of the team) meaning that it could be an excellent time to invest as clouds start to clear over both the domestic economy as well as the wider geopolitical uncertainty.

*Source: FE Analytics, total returns in pounds sterling, 1 May 2014 to 31 December 2024
**Source: fund presentation, April 2026
***Source: FE Analytics, total returns in pounds sterling, 14 June 2024 to 16 June 2026
****Source: Matthews Asia, 3 June 2026
^Source: Reuters, 5 June 2026
^^Source: Nomura, March 2026
^^^Source: FE Analytics, total returns in pounds sterling, 6 July 2018 to 16 June 2026
^^^^Source: AIC, 16 June 2026