Global emerging market portfolios, which have been underweight on India, could increase allocations to the country as rising volatility around artificial intelligence (AI) stocks prompts investors to diversify, according to Wing Chan, head of manager research – Europe and Asia Pacific at Morningstar.
Chan said some capital could move back towards markets such as India and China as investors reassess portfolios that have become increasingly concentrated in US equities and technology stocks.
“Markets have become very concentrated, which is also reflecting in portfolios as they are showing bias towards specific areas of the market like AI or tech or particular markets, which adds to the event risk,” he said at the Morningstar Investor Conference India 2026.
Chan identified diversification beyond US equities, increasing investments in active exchange-traded funds (ETFs), rising allocations to private market vehicles — comparable to alternative investment funds (AIFs) in India — and greater diversification across asset classes as some of the key trends shaping global investment portfolios.
With geopolitical uncertainty increasing over the past two years, Chan said investors should focus on building portfolios capable of weathering unexpected events rather than attempting to predict them.
“What we are trying to do is not try to anticipate what is going to happen, as global markets are very unpredictable currently. We are trying to advocate for investor portfolios to be constructed in a robust way to make sure they are sufficiently diversified,” he said.
Chan said Indian investors had understandable reasons for maintaining a strong home bias, including the country’s relatively fast economic growth, long-term equity returns and the presence of high-quality companies with strong management. Similar investment behaviour, he said, had been seen earlier in markets such as Japan, Hong Kong and Singapore.
However, he said Indian investors should gradually look beyond domestic equities and build exposure to global stocks, as investors in other developed and Asian markets have done.
According to Chan, asset allocation has both structural and cyclical elements. Investors may favour particular asset classes or segments, such as equities, small-caps and mid-caps, during different phases of the market cycle. Over the longer term, however, he expects Indian portfolios to become more diversified across asset classes and geographies.
Such a shift, similar to the evolution seen in the US, Europe and other Asia-Pacific markets, could also encourage more disciplined periodic investing and improve investors’ overall investment experience, he said.