India may corner over 20% of EM fund flows, says Allspring’s Paroda

India continues to be a strong contender for global capital in emerging markets and could receive over 20% of the allocation, says Prashant Paroda, Portfolio Manager for Emerging Markets at Allspring Global Investments.“You would still look at about 20% plus to be deployed in India,” he said, adding that nearly 30% of that would likely go into financial stocks. He stated that Indian banks and financial institutions, which had lagged over the past few years, are now showing signs of a strong catch-up trade.

Emerging markets (EMs) overall are becoming attractive again, especially as returns begin to diverge from the concentrated gains seen in the US. “There’s still a huge delta between what emerging market returns have been this year versus what the US market has,” Paroda said. A weakening dollar and more balanced earnings growth outside the US are also encouraging investors to look at EMs more closely.

India remains one of Allspring’s top two or three preferred EM destinations. While there were some concerns earlier this year around high valuations, Paroda believes evolving market dynamics are opening new opportunities. “Market leadership has changed a lot,” he stated. From high-growth stocks dominating earlier, leadership has now shifted toward banks, telecom, and even small-cap stocks, which are beginning to gain traction again.

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In contrast, the US market’s recent rally has been disproportionately driven by a handful of large-cap tech names. Paroda pointed out that, excluding the “Magnificent Seven,” the rest of the S&P 500 has seen muted earnings expectations and slower growth, prompting global investors to explore markets abroad.

The ‘Magnificent Seven’ refers to Apple, Microsoft, Amazon, Alphabet, Meta, Tesla, and Nvidia.

Despite earlier fears around global trade tensions and tariffs, Paroda said markets have stayed resilient and are now factoring in the possibility of future trade agreements. “It seems like the market is climbing the wall of worry,” he added.

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On the political front, Paroda believes US President Donald Trump’s influence on market volatility has diminished. “There’s more clarity now on where the administration wants to go,” he said, stating that markets are no longer reacting as sharply to Trump’s moves.

For the entire interview, watch the accompanying video

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