India’s flat spell raises odds of stronger returns, says Devina Mehra

First Global’s Devina Mehra expects Indian equities to outperform over the next two years, while urging investors to put 30% to 40% of their portfolios into global assets and approach the AI trade cautiously.

Devina Mehra expects Indian equities to outperform over the next two years, arguing that a long stretch of subdued returns has improved the odds of a stronger run ahead. Speaking at the Business Standard BFSI Insight Summit 2026’s Smart Investor Arena on Tuesday, the founder and chief managing director of First Global said India’s market had largely moved sideways for two years, a pattern she believes has often been followed by better performance.

Mehra said past periods of flat domestic markets had typically been followed by returns ranging from 5 per cent to 55 per cent, with an average of about 25 per cent. She framed that as a question of probabilities rather than prediction, saying that when sentiment becomes overly optimistic, the market often delivers weaker returns afterwards, and when investors are anxious to exit, the next phase is often stronger.

Her message was not a bearish call on India, but an argument for spreading risk beyond one market. Mehra said Indian equities account for less than 3 per cent of global market capitalisation, making it hard to justify keeping almost all assets at home. She also pointed to the effect of rupee depreciation, saying overseas exposure can help protect purchasing power over time. In previous interviews and appearances, she has repeatedly urged investors to avoid treating the US as a proxy for the whole world and to think globally rather than concentrating on a narrow group of stocks or markets.

Mehra said most investors should consider allocating 30 per cent to 40 per cent of their portfolios to global assets over time, while avoiding the temptation to constantly trade around short-term moves. She said asset allocation matters far more than most people recognise, and in earlier comments has argued that it drives the bulk of long-term returns. She also said around 80 per cent to 85 per cent of her own portfolio is invested globally, and that no market or style can lead forever because capital eventually rotates between sectors, asset classes and geographies.

She also cautioned against getting swept up in the artificial intelligence trade. Mehra said she has “no doubt that the next book on financial bubbles will have a chapter on AI.” The broader message from her remarks was one of discipline rather than excitement: diversify across countries, stay invested for the long term and avoid letting narrative-driven enthusiasm dictate portfolio decisions.