India is growing much faster than Brazil and Thailand, corporate earnings are accelerating again, and its long-term growth outlook remains stronger. Even so, foreign investors sold a record $24.6 billion of Indian equities in 2026 through August. Over the same period, they remained net buyers of roughly $1.6 billion in Thailand, while Brazil had a positive foreign-investor balance of around R$22.2 billion by early September.
On those measures, the three markets offer very different propositions. India combines superior growth with premium valuations. Brazil has weaker growth, but equities are extremely cheap, dividends are high, the market has substantial commodity exposure and interest rates are falling. Thailand also has weak economic growth, but listed-company profits are improving quickly and monetary policy remains highly accommodative. For an international investor, the relevant comparison is the prospective dollar return each market offers relative to the risk involved.
The global macro backdrop: why capital is looking beyond growth
The global environment has become more difficult for emerging-market equities. Brent crude has moved above $100 per barrel, rising energy prices have pushed inflation expectations higher, and government bond yields have climbed sharply. Major central banks have also moved back toward tightening. The U.S. Federal Reserve raised rates in September to 3.75%-4.00%, while higher borrowing costs globally are raising the return investors require from equities.
That makes starting valuations more important. When the risk-free rate rises, future corporate earnings are discounted more heavily, leaving investors less willing to pay very high multiples simply for growth.
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The current movement should therefore not be described simply as money leaving the United States. Bank of America reported in September that investors were buying U.S. equities at their fastest pace in three months. Institutions appear to be maintaining U.S. exposure while also seeking geographical diversification in markets where valuations, dividends or macro conditions offer a more attractive balance of risk and return.
Latin America has benefited from that search. CFA Institute notes that MSCI EM Latin America returned 56% in U.S.-dollar terms in 2025 and another 15% during Q1 2026. Even after those gains, The index traded at only 12.3 times trailing earnings at March-end, a 43% discount to global equities. That valuation gap gives slower-growing markets a way to compete with India for global capital.
India vs Brazil vs Thailand: the economy is not the market
On economic growth, India is clearly ahead. India’s real GDP expanded 7.8% YoY during April-June 2026, supported by investment and manufacturing, while Moody’s has raised its FY27 growth forecast to around 7%. Brazil’s Q2 GDP increased only 2.0% YoY, and household consumption contracted 0.4% QoQ. Thailand’s central bank expects economic growth of approximately 2.3% in 2026.
Valuations tell almost the opposite story.
| Metric | India | Brazil | Thailand |
| Economic growth context | ~7% FY27 outlook | 2.0% Q2 YoY | ~2.3% 2026 |
| MSCI forward P/E | 19.92x | 8.34x | 16.92x |
| MSCI dividend yield | 1.28% | 5.46% | 3.16% |
| 2026 foreign equity flows | -$24.6bn through Aug | +R$22.2bn by early Sept | +THB51.18bn (~$1.6bn) through Aug |
| Monetary direction | Tightening risk rising | Rate-cut cycle | Policy rate at 1% |
| Policy Rate | 5.25% | 13.75% | 1.00% |
| Main macro exposure | Domestic growth / oil importer | Commodities / banks | Export and earnings recovery |
This is the core of the investment debate. An investor buying India is paying almost 20 times forward earnings for faster growth. Brazil offers listed-company earnings at roughly 8.3 times forward earnings, along with a dividend yield above 5%. Brazil does not have to match India’s economic growth for its equities to outperform. Earnings only need to remain resilient while some of the valuation discount closes.
India: excellent growth, but investors are still paying for it
India’s equity fundamentals are improving. Nifty 50 companies generated average profit growth of approximately 18% in the June quarter, the fastest pace in ten quarters. Earnings strength broadened across metals, telecom, financials, retail and consumer-facing businesses, while brokerages reported a favourable ratio of earnings upgrades to downgrades.
That makes the scale of foreign selling notable. Foreign portfolio investors withdrew $24.6 billion from Indian equities during 2026 through August, even though they returned with $3.1 billion of purchases in August, the highest monthly inflow in almost two years. Valuation is one reason. MSCI India’s forward P/E of 19.92x is more than twice Brazil’s 8.34x.
Currency risk is another. The rupee recently traded around ₹95.88 per dollar, with the RBI intervening to prevent disorderly depreciation. Foreign investors ultimately measure their returns in dollars, so a weaker rupee can erode part of the return generated by Indian equities.
Oil adds another layer of pressure. India’s crude-oil import bill jumped 25.8% YoY to $16.69 billion in August, while the Indian crude basket averaged more than $90 per barrel during the month. Higher energy prices worsen the trade balance, add to domestic inflation, put pressure on the currency and increase the possibility of tighter monetary policy.
India’s wholesale inflation had already accelerated to 9.92% in August, with fuel and power prices rising 22.93%. As oil prices rise, India’s import bill increases, putting greater pressure on the rupee and adding to inflation. Higher inflation can raise the risk of RBI tightening, which pushes equity discount rates higher and makes premium P/E valuations more difficult to sustain.
India’s growth outlook remains strong. The question for foreign investors is how much they are willing to pay for it under less favourable macro conditions.
Brazil: the market is pricing a rerating, not an economic boom
Brazil has almost the opposite setup. Economic growth slowed to 2% YoY in Q2, and household consumption contracted. Those numbers look weak next to India’s.
At the same time, that slowdown is helping create the conditions for monetary easing. The Brazilian central bank cut the Selic rate for a fifth consecutive meeting in September to 13.75%, taking cumulative easing since March to 125 basis points. Interest rates remain very high, but they are now moving lower.
For equities, the transmission works through interest rates and required returns. As the economy slows, inflation gradually moderates, giving the central bank room to lower the Selic rate. Falling policy rates can pull bond yields lower, reducing the return investors require from equities and allowing valuation multiples to expand.
At approximately 8.3x forward earnings, Brazilian equities have several potential sources of return: earnings growth, a 5.46% dividend yield, currency appreciation and a possible valuation rerating.
The structure of the market also matters. Vale accounts for roughly 11% of MSCI Brazil, Itaú Unibanco 8.5%, while Petrobras’s ordinary and preferred shares together make up more than 15%. The index therefore has substantial exposure to mining, energy and financials.
Those sectors are closely tied to the current macro environment. CFA Institute also points to a longer-term commodity theme. The AI investment boom is increasing demand for materials such as copper and lithium, while global data-centre infrastructure investment between 2026 and 2030 could reach around $3 trillion. Latin America is an important supplier of many of the commodities needed for that buildout.
Brazil’s investment case therefore rests on a combination of cheap valuations, high dividends, commodity exposure, falling interest rates and global diversification. That combination can attract foreign investors even while India’s economy continues to grow much faster.
Thailand: earnings are growing much faster than the economy
Thailand shows especially clearly why GDP growth and equity returns can diverge. The Thai economy is expected to grow only around 2.3% during 2026, yet aggregate net profit among listed companies increased 22.2% YoY during H1 2026.
The SET Index was also up 26.6% YTD at the end of August, despite falling 1.8% during that month. Foreign investors remained net buyers of THB51.18 billion, or roughly $1.6 billion, over January-August.
Much of the market move reflects expectations. Investors entered 2026 expecting weak domestic growth. Corporate profits then recovered strongly, EPS estimates moved higher and capital expenditure by listed companies improved.
The SET reports that Industrials and Resources were among the strongest sectors, with Agro & Food also outperforming during August.
Thailand also has one of the most supportive monetary settings among major emerging markets. Its policy rate is only 1%, while the baht has depreciated around 5.7% against the dollar. The central bank says that depreciation can help exporters as long as the move remains orderly. At August-end, the SET also offered a dividend yield of 4.3%, well above the reported Asian average of 2.8%.
Thailand’s equity story starts with low expectations. If earnings come in better than expected, analysts may raise EPS forecasts, which can attract foreign inflows and support a rerating of the market.
Sector outlook: what each market offers investors
The three markets give investors exposure to very different earnings drivers.
India
India remains primarily a domestic structural-growth market. Financials benefit from credit expansion, industrial and capital-goods companies from investment activity, telecom from rising monetisation, and metals from stronger pricing. Hindalco, Reliance, JSW Steel, ONGC and Bharti Airtel were among the companies contributing to the strong June-quarter earnings season.
Businesses with large imported input costs are more exposed to current macro pressure, as are sectors sensitive to higher interest rates. Expensive crude also puts pressure on margins in transportation, consumer businesses and oil-marketing companies.
Brazil
Brazil is much more directly exposed to commodities, financials and the interest-rate cycle. Vale provides metals exposure, Petrobras energy exposure and Itaú, Bradesco and Nubank financial exposure. If interest rates continue to fall, banks and domestic cyclicals could also benefit from stronger credit demand and lower discount rates. The main risk is that inflation or fiscal expectations deteriorate enough to interrupt the easing cycle.
Thailand
Thailand combines technology, resources, telecom, tourism, consumer and infrastructure exposure. MSCI Thailand is unusually concentrated. Delta Electronics alone represents approximately 20%, followed by PTT at 10.6%, Advanced Info Service at 8.9%, Airports of Thailand at 6.5% and Gulf Development at 6.1%. That means Thailand’s market is not simply a tourism-recovery trade. Foreign investors also gain exposure to electronics, energy, telecom infrastructure and industrial businesses. The differences between the markets become even clearer at the company level.
India: HDFC Bank, Reliance, Bharti Airtel and Larsen & Toubro
HDFC Bank and Reliance are the two largest MSCI India constituents, followed closely by ICICI Bank. Along with Bharti Airtel, Axis Bank, Larsen & Toubro and Bajaj Finance, they leave the benchmark heavily exposed to India’s domestic financial and investment cycle.
Despite the strong June-quarter earnings season, HDFC Bank and Reliance were weak enough to drag the major indices lower during August. That shows the challenge facing Indian equities at current valuations: strong aggregate fundamentals may not be enough to lift the index when the largest stocks are already priced aggressively.
The main variables to watch are credit growth for banks, capex execution for industrial companies and whether earnings upgrades become strong enough to reduce forward valuations without requiring share prices to fall.
Brazil: Petrobras, Vale and Itaú
These three companies account for a large part of Brazil’s investment case. Petrobras benefits from high global energy prices but also carries political pricing risk. In September, the gap between Brazilian diesel prices and international import parity widened sharply, forcing a policy response and showing why Petrobras cannot be valued purely as a global oil company.
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Vale provides exposure to metals and global infrastructure spending. Itaú is a more direct way to gain exposure to Brazil’s domestic interest-rate cycle. If oil and metals prices remain elevated while the Selic continues to fall, Brazil could receive support from both sides of the index: commodity earnings and domestic multiple expansion.
Thailand: Delta Electronics, PTT and Advanced Info Service
Delta Electronics represents more than 20% of MSCI Thailand, giving technology and electronics a major influence on market performance. PTT adds energy exposure, while Advanced Info Service provides access to domestic telecom and digital consumption.
Thailand’s government has also doubled its public solar-power programme from 5 GW to 10 GW, adding another medium-term catalyst for infrastructure and power-related businesses. Management commentary is most useful where companies quantify how export demand, energy prices, telecom monetisation or new infrastructure spending will affect earnings. Quoting management without that link adds little to the analysis.
What could reverse the FII rotation?
The relative attraction of Brazil and Thailand could weaken if India’s current macro disadvantages begin to ease. Oil is one important variable. A sustained decline in crude would reduce India’s import bill, ease inflationary pressure and support the rupee.
The currency matters as well. A more stable rupee would improve the dollar-denominated return available to foreign investors. Valuation is the third factor. Indian earnings either need to keep rising faster than share prices, or equity prices need to fall enough to reduce the valuation premium relative to competing emerging markets.
Foreign positioning has already shown that it can change quickly. FPIs returned with $2.12 billion of buying in July and another $3.1 billion in August, suggesting that foreign investors have not abandoned India. Their willingness to add exposure appears sensitive to the combination of earnings, currency stability and valuation.
Brazil’s case can also weaken if inflation remains elevated, fiscal concerns increase or the rate-cutting cycle stalls. Thailand is vulnerable if the 22% earnings rebound turns out to be temporary rather than sustained.
Outlook
India remains the strongest economy of the three, but faster economic growth does not automatically translate into the strongest equity-market setup. Indian equities currently combine high growth with high valuations, while investors also face risks from expensive oil, rupee weakness and higher interest rates. Brazil has slower growth but very cheap equities, high dividends, commodity exposure and falling interest rates. Thailand has weak GDP growth but rapidly improving corporate earnings, accommodative monetary policy and continued foreign participation.
The divergence in foreign flows during 2026 does not suggest that institutions have stopped believing in India’s long-term growth prospects. It shows that valuation still matters.
Investors cannot buy an economy directly. They buy listed companies at prevailing prices, and their eventual returns reflect earnings growth, dividends, currency movements and changes in valuation. That is how an economy growing at 2% can sometimes offer a more attractive equity setup than one growing at 7%.
For the rest of 2026, the main issue is whether India’s earnings growth, currency stability and valuation improve enough to make the premium attached to Indian equities more attractive to global institutions.