印度量化策略：是时候增加印度的风险敞口了——机会范围扩大

India Quant Strategy: Time to add more India exposure - Theopportunity set widens We remain neutral on India. However, with the momentum (tech/AI) trade under-pressureled by record high valuations, earnings expectations and crowding; we believe the casefor India is improving. While the recovery remains selective rather than broad-based, thecombination of cheaper valuations, emerging earnings support for large-caps and potentialforeign flow normalization creates a more constructive outlook. We prefer large-caps overSMIDs and recommend adding momentum names while maintaining some high-qualitydefensive exposure; especially stocks where earnings momentum is improving. Rupal Agarwal+65 6326 7641rupal.agarwal@bernsteinsg.com Cheng Zhang, CFA, CQF+852 2123 2636cheng.zhang@bernsteinsg.com India valuations have reset. Pockets of earnings support emerging:MSCI India hasfallen from peak valuations of 23.2x fwd. PE in Q424 to 18.6x fwd. ie. below 10yr avg, afterthree years. India’s premium to EM has fallen to 10yr levels on fwd. PE and at COVID lowson PB. Most sectors are now trading at or below 10yr average, with Financials and Techtrading near COVID-era PEs, creating a much better entry point. While an average stockis still seeing higher pace of downgrades, there are early signs of earnings recovery led bylarge-caps and certain sectors like Materials and Consumer. The long-term earnings growthexpectations have also fallen to 10.6% which is way below historical averages; indicatingpositive returns over the next 12m. Return of foreign investor interest and the growing opportunity set:We believe theopportunity set has increased in India, even for global investors; who have been usingIndia as a funding source for the regional AI/tech trade, resulting in record outflows of -US$29bn. This has started to come back in July (+US$1.8bn) and even active GEM fundshave reduced their UW to -2.1% from -2.7%. Some sectors such as Staples, Tech, Energy,Real Estate present a trade due to record low crowding while above-average dispersion inUtilities, Real Estate, Tech and Materials is presenting active stock picking opportunities.Financials and Tech are extremely cheap while Materials and Consumer could find supportfrom earnings recovery. Factor positioning:We have been positive on quality since the beginning of the year andthe style has been the best in 1H26, down -0.4% vs. market down -4.5%. India qualitycomes at a price but given earnings upgrades are intact and geopolitical uncertaintyremains high, we believe keeping this defensive exposure on is prudent. Since April, weadded more risk in India through momentum stocks, which are up 15% since then. Webelieve momentum rally in India is likely to strengthen from here given near record lowvaluations and inflection on earnings/crowding cycle. We also prefer large-cap exposure vs.SMIDs given very attractive valuations and better earnings revisions. Across the styles, wefocus on stocks where earnings momentum trends have been showing an improvement inthe last 6 months. We show our preferred screens in Exhibit 17-Exhibit 18. For our Asia, China, Koreascreens, see our updated deck - Asia Quant Strategy Deck. DETAILS Indian market has been under pressure since Q425 and in the first half of 2026, MSCI India is down -10% in dollar terms whileKR was up 112% and TW 64%. Since June, as expected, momentum trend has started seeing a reversal in turn improvingsentiment towards the anti-momentum/anti-AI market ie. India. Since April, we added more risk back in India, and we believethere are ample opportunities for investors to look at. We discuss them below. INDIA IS NOW CHEAP - FINANCIALS AND TECH NEAR COVID LOW MULTIPLES Indian market has de-rated to below 10yr average valuations after 3yrs; now trading at 18.6x fwd. PE ie. -0.7SD below 10yr avg.On book-value it is still slightly above average levels at 3.3x PB. Relative to EM, valuations seem to have bottomed on 12m fwd.PE while on PB the relative valuation has now dropped to COVID lows. Most sectors are now trading at or below 10yr average,with Financials (-1.9SD) and Tech (-1.5SD) being the cheapest sectors trading at COVID level valuations. Healthcare, Industrial,and Utilities are relatively expensive, trading above 10yr average, but within +1SD. Staples, Financials, Technology, Energy aretrading at COVID lows even on PB. Hence, Financials, Technology, Energy are quite attractively valued now. (Exhibit 1-Exhibit 3) Data as of Jun 30th 2026Source: MSCI, FactSet, Bernstein Analysis INDIA SEEING EARLY SIGNS OF EARNINGS RECOVERY LED BY LARGE-CAPS AND MATERIALS/CONSUMER Disappointing earnings has been a key drag for Indian equities as an average stock continued to see higher pace ofdowngrades. Unfortunately, the downgrade cycle for India is still not showing a clear bottom; however the large-caps seem tobe getting back some earnings support. India is seeing a broad-based earnings down cycle visible across all sectors exceptMaterials a