Devina Mehra Predicts Strong Indian Market Returns Over Next Two Years

Devina Mehra, the founder and chairman of First Global, expressed optimism about the prospects for Indian equities during a recent industry event. Speaking at the Business Standard BFSI Insight Summit 2026’s Smart Investor Arena on Tuesday, Mehra projected that after a period of stagnation, Indian stocks are set to outperform average market returns over the next two years.

She highlighted that Indian markets have remained largely flat over the last two years. However, historical data suggests that following similar phases of consolidation, the market often experiences robust growth. "When the Indian markets have been flat for two years, the subsequent returns have ranged from 5 to 55 percent, averaging about 25 percent," Mehra explained. This pattern leads her to believe that the probability favors stronger than usual returns for Indian equities in the near future.

Mehra also addressed market sentiment, noting that times of excessive optimism, such as the buoyancy seen in 2024, tend to precede periods of below-average returns. Conversely, when investors are anxious and inclined to exit, it often signals an upcoming phase of above-average gains. "When your head is screaming, get out of the market, the next period returns are going to be above normal," she said.

While optimistic about India’s potential, Mehra strongly advised investors not to concentrate their portfolios exclusively in the domestic market. She pointed out that India represents less than 3 percent of the global market capitalization, making a heavy domestic allocation disproportionate. "There is no logical reason why 90 to 100 percent of your assets should reside in India," she stated.

Another factor influencing her recommendation for global diversification is the risk of rupee depreciation. Mehra suggests that investors allocate at least 30 to 40 percent of their portfolios to international markets over time. This approach can help mitigate currency risks and provide exposure to growth opportunities beyond India’s borders.

Discussing her own investment strategy, Mehra revealed that approximately 80 to 85 percent of her portfolio is invested internationally. She emphasized the importance of asset allocation and cautioned against holding 100 percent of one’s investments in equities. According to her, equity investments should be made with a long-term horizon of seven to eight years, and while stock selections may change, the overall allocation should remain steady. "Nobody can predict what will happen within one year," she remarked.

Mehra also commented on the current enthusiasm around artificial intelligence (AI) investments. She expressed skepticism about the sustainability of AI-related market excitement, predicting that future analyses of financial bubbles will include a significant focus on AI. "AI investment involves assets that depreciate very quickly," she said. Mehra warned that if the AI bubble bursts, these assets may lose their value for one to two years following the collapse.

She cited SpaceX as an example of a company that symbolizes the peak of valuation bubbles, noting the large amounts of money invested without granting corresponding voting rights to investors. This highlights concerns over inflated valuations and investor protections in emerging sectors.

Mehra’s insights come at a time when global investors are carefully considering diversification strategies amid fluctuating market conditions and currency risks. Her advice to maintain a balanced international portfolio and focus on long-term equity investments reflects a cautious yet optimistic view of India’s market potential and the broader investment landscape.