Goldman Sachs, in a research note, pointed out that they believe, “AI, China, and India are key areas that offer opportunities in 2026 for active investors able to navigate the diverse landscape.”
According to their analysis the emerging market (EM) equities clocked their strongest performance in 8 years in 2025. Moving forward, there is a “clear future earnings visibility” led by artificial intelligence. Despite a slow performance, they expect India’s earnings to also rebound in FY27.
India’s improving investment signals
India lagged in 2025 due to high starting valuations, but the international brokerage firm believes it is poised for an earnings rebound in 2026 and 2027, with profits expected to grow at a mid-teen rate of 14%. There are a lot of factors contributing to that, like supportive government policies, booming domestic consumption, and narrowed valuation premiums. This makes India an increasingly attractive entry point for investors.
Analysts at Goldman Sachs now anticipate an earnings rebound, with MSCI India profits growing 10% for the full calendar year (CY) 2025, accelerating to a robust mid-teen growth of 14% for CY26 and CY27, above the 10% EM average excluding Korea and Taiwan.
Strong performance and positive outlook
EM equities delivered exceptional performance in 2025, with the MSCI EM Index returning 34.4%, outperforming most developed markets. This momentum is expected to continue into 2026, supported by resilient economic growth, anticipated interest rate easing, a weaker US dollar, and robust corporate fundamentals.
“We believe a continuation of supportive financial conditions will bolster EM economies over the coming quarters. Support stems from the potential for softer headline inflation across EMs, aided by lower oil prices, which benefits EM net oil importers,” the report said.
AI as key technology driver
The AI technology ecosystem in EMs is maturing rapidly, with Asian businesses becoming increasingly vital to the global AI supply chain. Markets like Korea and Taiwan saw significant gains driven by semiconductor performance, and there are select opportunities in companies involved in the AI buildout with clear future earnings visibility through 2026.
Cyclical tailwinds from the AI memory upcycle are expected to further strengthen the outlook. This will potentially reinforce earnings momentum across the semiconductor complex, “while continued corporate governance reform in Korea remains supportive,” said Goldman Sachs.
China’s economic resilience through innovation
Despite trade tensions, China’s economy remains resilient due to export re-orientation and a focus on technological self-reliance. Key areas of opportunity include AI infrastructure, lithium-ion battery manufacturing for EVs, innovative pharmaceuticals, and robotics, where China has become one of the most automated countries in the world. China contributes 30% of global manufacturing output.
“Domestically, although challenges from the real estate sector and consumer confidence persist, we believe their impact on overall growth is diminishing,” said the report.
The case for active management
The report emphasised that EM markets are often under-researched and have high return dispersion, which creates significant alpha potential for active managers.
Giving the example of India, Goldman Sachs pointed out that the country’s active managers have consistently outperformed benchmarks across various timeframes by employing flexible, all-cap strategies.
“We believe an active, risk-aware approach is essential to navigate this complex landscape, filter noise, and identify attractive opportunities,” the global broker said.
Passive strategies may miss information blind spots, whereas active, on-the-ground expertise allows for better navigation of market inefficiencies and complex landscapes.