2026

Understanding India’s market consolidation and the opportunity ahead. What happened to the Indian Market in 2025? MSCI India (in local currency terms, INR) has largely moved sideways since peaking in September 2024, withthe past year’s consolidation driven by cyclical and external pressures rather than any meaningful weakeningin underlying fundamentals. Earnings normalisation: Corporate earnings growth cooled in 2025 following a sustained period of strong momentum from 2020 to  2024, with fewer upside  surprises and pockets of weaker demand and margin pressure. Index-level profit growth was insufficient tojustify another sharp leg up, while previously overheated segments such as small/mid-caps and ratesensitive stocks corrected asfundamentals caught up and regulatory scrutiny increased. US–India trade risk: In 2025, the US imposed steep tariffs on a broad set of Indian exports, with effective duties in some categories rising to ~50%. These measures threaten export volumes and margins for several India-listed, US-exposed sectors, while ongoing diplomatic frictions and the risk of further trade or secondary sanctions have increased India’s perceived risk premium, reinforcing foreign underweights and sustained equity outflows. 2025 AI and global tech dominance: Equity market leadership in the US and parts of Asia was driven by AI and large-cap tech re-ratings. India underperformed despite stable macro fundamentals, reflecting the lack of large, pure-play AI mega caps capable of attracting incremental global thematic capital. Foreign investor outflows: Foreign portfolio investors materially reduced India equity exposure through 2024–25 as capital rotated to cheaper or more compelling EM opportunities such as China. Apart from that, a weak Rupee, US-India trade tensions and alternative earnings stories drove net FPI outflows, with domestic mutual funds and retail inflows cushioning downside but limiting upside during rallies. Currency Impact While MSCI India has only marginally declined in INR terms since September 2024, returns in AUD have been materially weaker, with MSCI India (AUD) down around 15% over the period due to adverse AUD/INR currency movements. AUD has strengthened 9% against the INR since September 2024, with the divergent currency outcomes between the INR and AUD reflecting differences in external exposure, terms of trade and central bank policy frameworks.  – US–India trade tensions: Heightened tariffs and trade tensions with the US have undermined India’s export prospects, increased concerns over the current account and trade revenues, and placed additional downward pressure on the INR. – Commodity price dynamics: Global commodity markets emerged as one of the strongest-performing asset classes in 2025, as a combination of supply constraints and resilient demand pushed many key prices higher. Australia’s exposure to iron ore, gold, LNG and agricultural exports supports its terms of trade and currency when commodity prices are resilient, contrasting with India’s vulnerability as a net commodity importer.   – Policy and currency management: The RBI has prioritised containing excessive volatility over defending a specific INR level, allowing the currency to weaken gradually in line with fundamentals, inflation and rate differentials. In contrast, the RBA’s stronger inflation-fighting credibility has underpinned real yields and sustained demand for AUD-denominated assets IAEF vs subsequent returnsSince its inception, India Avenue Equity Fund (IAEF) has historically delivered strong performance following periods of market weakness. Specifically, when rolling 1-year returns fall below -10%, the fund has achieved an average subsequent 1-year return of 49%, a 3-year return of 22% p.a., and a 5-year return of 20% p.a. Importantly, these results are not solely attributable to market beta, as they outperform the MSCI Index’s corresponding subsequent returns over the same periods. This track record highlights IAEF’s ability to capitalise on market recoveries. As of 23 January 2026, IAEF’s rolling one-year return is circa -10%. As seen above, periods of comparable underperformance have historically been followed by strong rebounds, supported by India’s robust market fundamentals. India’s economy in early 2026 remains one of the fastest‑growing major economies, driven by robust domestic demand, supportive fiscal and monetary policy, and structural reforms While U.S. trade tensions have introduced export headwinds and near‑term uncertainty, progress on the India–EU FTA provides a significant alternative channel for trade expansion and diversification. Analyses ahead of the conclusion estimate that improved market access under the FTA could potentially increase Indian exports to the EU by tens of billions of dollars over the coming years and strengthen India’s participation in European value chains. Source: MSCI, IAEF Internal. Data taken from IAEF’s inception date of September 2016 to December 2025 . Subsequent return data is calculated on an average basis and is taken when IAEF rolling 1Y returns were less than -10%. IAEF Returns are pre-tax and post-fees.    IAEF vs Peers The chart highlights the 5-year annualised returns of India-focused equity funds and ETFs available in Australia. IAEF leads the pack with a 5-year return of 13.8% p.a., outperforming all other peers. The next best performer is Fiducian India at 11.8% and Fidelity India at 11.2%, while broad-market ETFs such asiShares MSCI India ETF (AUD) and Global X India Nifty 50 ETF delivered 10.8% and 10.0%, respectively. This data underscores the long-term dominance of IAEF, consistently delivering superior returns relative to both active managers and passive benchmarks over the long run. Disclaimer This Note (‘Note’) has been produced by India Avenue Investment Management Limited (‘IAIM’) ABN 38 604 095 954, AFSL 478233 and has been prepared for informational and discussion purposes only. This does not constitute an offer to sell or a solicitation of an offer to purchase any security or financial product or service. Any such offer or solicitation shall be made only pursuant to a Product Disclosure Statement, Information Memorandum, or other offer document (collectively ‘Offer Document’) relating to an IAIM financial product or service. A copy of the relevant Offer Document relating to an IAIM product or service may be obtained by writing to us at IA@indiaavenue.com.au or by visiting http://www.indiaavenue.com.au. This Note does not constitute a part of any Offer Document issued by IAIM. The information contained in this Note may not be reproduced, used, or disclosed, in whole or in part, without the prior written consent of IAIM.  Past performance is not necessarily indicative of future

For Australia, the implications are clear. India is not simply a fast‑growing market; it is a strategic partner. Australia’s economic future is being reshaped by a partner whose importance is accelerating faster than most investors realise. For decades, Australia’s external orientation has been dominated by the United States and China. But a new strategic relationship is emerging — one built on complementary strengths, shared economic interests, and long‑term structural alignment. India is becoming increasingly significant for Australia, and the shift is now being reinforced at the policy level. Positive Tariff Developments  A major milestone arrives on 1 January 2026, when Australia will scrap tariffs on all Indian exports under the India–Australia Economic Cooperation and Trade Agreement (ECTA). This is not a symbolic gesture — it is a structural reset.  It signals that both nations see each other as long‑term economic partners, not transactional trading counterparts. For Australia, it opens the door to deeper integration with the world’s fastest‑growing major economy. For India, it strengthens access to a stable, high‑income market with strong demand for services, resources, and education. But the real story goes far beyond tariffs. India’s rise is not just a growth story — it is a strategic story, powered by four internal engines that align naturally with Australia’s long‑term interests: demographics, digitisation, financialisation, and formalisation. A Strategic focus on India’s Demographics India’s demographic advantage is unmatched. With a median age of 28 and more than 12 million people entering the workforce each year, India is building a consumption base that will expand for decades.    This is not a short‑term boom; it is a structural demand cycle that supports sectors where Australia has deep expertise — education, financial services, healthcare, and premium consumer goods. Digitisation is the second engine. India’s digital public infrastructure — Aadhaar, UPI, GST, ONDC — has created a low‑cost, high‑efficiency economic backbone that is accelerating productivity and formalising the economy. For Australian investors, this means a more transparent, investable market where listed companies gain market share and earnings growth becomes more predictable. Financialisation and formalisation are the third and fourth engines. As more Indians enter the banking system, adopt digital payments, and invest in financial products, the country is experiencing a structural rise in savings, credit penetration, and capital market participation. This creates a deeper, more resilient financial ecosystem — one that supports long‑term corporate growth and aligns with Australia’s strengths in financial services and wealth management. Indian Companies Ready for JVs India’s corporate sector is also entering a powerful new phase. Balance sheets are strong, leverage is low, and profit‑to‑GDP is rising from multi‑decade lows.  Companies are positioned to benefit from operating leverage as demand accelerates, and many are expanding globally thanks to competitive labour costs, engineering talent, and supportive policy frameworks. For Australia, the implications are clear. India is not simply a fast‑growing market; it is a strategic partner whose internal growth engines align with our economic strengths, diversification needs, and long‑term investment objectives.  With tariffs set to fall to zero from January 2026 and bilateral ties deepening, India is becoming an essential part of Australia’s economic future — and a compelling allocation for investors seeking structural growth beyond the ASX and China.

The World’s Next Operating System   India is increasingly emerging as a preferred destination for large-scale foreign capital deployment across infrastructure, manufacturing, technology, and human capital. Foreign inflows into Indian equities have regained momentum, but the more consequential development lies in foreign direct investment and long-duration capital. Global technology leaders are deploying tens of billions of US dollars into cloud infrastructure, AI capacity, advanced manufacturing, and workforce development.  These investments reflect long-term strategic intent rather than cyclical capital allocation. Microsoft Microsoft’s planned US$17.5 bn investment between 2026 and 2029 is its largest in Asia, and it highlights India’s role as a platform for AI diffusion at a population scale. The focus extends beyond data centres to national digital platforms and large-scale skills training, with a target of equipping 20 million people with AI capabilities by 2030. This positions India not only as a consumer of technology but as a scalable producer of digital talent.  Satya Nadella, chairman and CEO of Microsoft, announced the investment during his visit to India Amazon Amazon has announced plans to invest more than US$35 billion in India by 2030, building on nearly US$40 billion already deployed over the past 15 years, positioning it as one of the country’s largest foreign investors. The investment spans e-commerce, cloud, logistics, AI and digital infrastructure, with a strategic focus on AI-led digitisation, export expansion and job creation.   To date, Amazon’s platform has digitised over 12 million small businesses, enabled US$20 billion in cumulative e-commerce exports, and supported approximately 2.8 million jobs across India’s technology, logistics and services ecosystem. By 2030, Amazon expects to support up to 3.8 million jobs and quadruple cumulative exports to US$80 billion, while extending AI capabilities to 15 million small businesses and AI education to 4 million students.   Amazon’s investment in India Apple Manufacturing tells a parallel story. Apple’s rapid expansion of iPhone production in India, now spanning all major models and supplying global markets, demonstrates how India is becoming a meaningful export base rather than a marginal alternative. In the first half of 2025, India produced nearly 24 million iPhones, with exports surging over 50% year-on-year. India has overtaken China as the largest exporter of smartphones to the US, marking a significant realignment in global supply chains. What it means for investors Taken together, these developments reflect a broadening of India’s growth drivers. Domestic consumption remains important, but the incremental growth impulse is increasingly coming from foreign capital, global enterprises, and high-value infrastructure investment.   For investors, this shift reinforces the case for active management: the primary beneficiaries of India’s transformation are increasingly found across supply chains, infrastructure, industrials, and emerging technology platforms, rather than solely within yesterday’s large-cap index constituents that dominate passive exposures.