India Becomes a Core Allocation in Global Portfolios

For years, India sat at the edge of global alternatives as an interesting, high-beta add-on in Asia allocations. That framing is now evolving. The country’s private markets are entering a phase where scale, structure and exits combine to make India a core, programmatic allocation for institutional portfolios.

At the heart of this re-rating is evidence of scale. Current estimates place the AUM of India’s alternatives market at ~$400 billion as of 2024. This number is expected to grow 5x to ~$2 trillion over the next decade, driven by HNI wealth formation, domestic institutional participation and the continued presence of global managers.

What’s Different Now: Three Structural Proofs

1. Breadth of the market. India today is not a single-engine growth story. PE/VC remains the largest pillar, but real assets have deepened with REITs and InvITs, and private credit has emerged as a distinct, scaled strategy. This multi-engine structure reduces dependency on one theme or cycle and allows allocators to build diversified India sleeves inside Asia mandates.
2. Institutionalised exit channels. Over the past few years, India’s private markets have developed a more predictable exit environment. The introduction and scaling of REITs and InvITs have created regulated, yield-bearing vehicles that allow asset monetisation within infrastructure and real estate. At the same time, the rise of secondary transactions,GP-led continuation funds, and active IPO markets has expanded liquidity options for private-equity and venture investors. These mechanisms indicate a market evolving from sporadic exits to structured, multi-route realisations that support consistent fund distributions.
3. Domestic capital formation. A growing share of India’s private-market capital now originates from domestic sources. Pension, provident, and insurance funds are gradually broadening their mandates to include AIFs, REITs, and InvITs, providing a steady rupee-denominated base for long-term investing. This shift signals that India’s next growth phase will be increasingly financed by its own institutional savings, with foreign investors acting as strategic co-participants.

Why Global Allocators Are Re-weighting

Over the past five years, India’s regulatory architecture for private markets has been overhauled. SEBI has introduced mandatory Private Placement Memorandum (PPM) filings, performance benchmarking for AIFs, and standardized valuation methodologies. It has also provided a transition framework for older venture funds to migrate into the AIF regime. Together, these measures have created a consistent and auditable disclosure framework that global allocators can underwrite with confidence.

Equally important is the breadth of the opportunity set. India’s alternative investment universe now spans private equity and venture capital, infrastructure and real assets, and a fast-expanding private-credit market. Each of these segments has matured to the point where large allocators can deploy programmatic capital across growth, yield, and hybrid strategies rather than timing individual vintages.

For global chief investment officers, this evolution means India has become a genuinely investable ecosystem: diversified by strategy, standardized in governance, and increasingly deep in liquidity. It allows capital to compound across cycles instead of waiting for the perfect entry window.

From Growth Beta to Cash-Flow Compounding

A decade ago, India’s private markets offered scale but not always predictability. Returns often hinged on the macro cycle rather than on embedded liquidity mechanisms. That dependence has begun to fade.

Yield platforms now provide steady cash flows. The expansion of REITs and InvITs has introduced transparent, yield-oriented structures that distribute income systematically rather than episodically. These vehicles have established consistent distribution, leverage, and governance standards, making infrastructure and real estate investable at institutional scale.

Private credit and special-situation strategies have also evolved into standing products that recycle capital through income rather than only through exits. They offer sponsors and investors an intermediate layer of cash generation, with interest, coupon, or structured payout, that smooths portfolio performance across cycles.

Private equity liquidity has also improved. IPO activity, secondary transactions, and GP-led continuation vehicles have made cash realisation more predictable across vintages. The ecosystem now allows managers to distribute capital more consistently, with exits occurring across multiple routes rather than relying solely on public markets.

Together, these developments have shifted India’s private markets from being purely growth-driven to being cash-flow capable. For allocators, this marks the transition from “mark-to-model” returns to recurring, monetisable yield, allowing India exposure to sit comfortably within global income, hybrid, or multi-asset sleeves.

Structural Variables That Will Shape the Next Phase

India’s repositioning as a core allocation in global portfolios is anchored in real progress but still rests on variables that will determine how the next decade unfolds. Three are particularly consequential.

1. Deployment and competition.
   The rapid expansion of private-market AUM is bringing more managers and larger pools of capital into contention. This dynamic may gradually lift entry valuations, which is a normal feature of market maturity, but one that underscores the importance of disciplined capital deployment.
2. Policy implementation.
   India’s regulatory trajectory has been consistently positive. The next test lies in consistent execution across managers and time, translating regulatory design into sustained investor confidence.
3. Liquidity composition.
   Exit mechanisms have multiplied through REITs, InvITs, secondaries, and sponsor-to-sponsor transactions. The coming phase will reveal how these channels distribute across sectors and strategies, and whether they can provide uniform liquidity during different market cycles.

Taken together, these factors will determine the pace and resilience of India’s private-market expansion. The foundations are strong; the differentiator will be how predictably the ecosystem manages growth, governance, and cash conversion.

The Allocation Shift

India’s positioning within global portfolios is undergoing a quiet but decisive transformation. In Asia-Pacific mandates, exposure to India is increasingly being structured as a dedicated sleeve that spans growth equity, buyout, infrastructure, and private credit, rather than as a short-cycle component of an emerging-markets bucket.

Global institutions are beginning to treat India programmatically, with defined pacing and measured performance benchmarks across vintages. This reflects a change in market architecture: regulation, governance, and exit mechanisms have evolved to support continuity of allocation.

In practical terms, India is moving from episodic participation to recurring inclusion, a market that fits within long-term portfolio design rather than tactical rotation. It marks the shift from an exposure justified by growth to one sustained by structure.

Research Analyst

Simran Mehla

Frequently Asked Questions

Q: Why is India being viewed as a core allocation in global portfolios?

A: India’s private markets have reached a scale and maturity that allow for recurring, programmatic investments. Strong regulatory architecture, diversified strategies across private equity, credit, and real assets, and improved liquidity mechanisms have moved India from a tactical exposure to a structural allocation.

Q: How has regulation supported India’s private-market evolution?

A: SEBI has introduced reforms such as mandatory PPM filings, performance benchmarking, standardised valuation, and a migration framework for venture funds. These steps have strengthened transparency and comparability, making India’s private markets more accessible to global allocators.

Q: How has liquidity improved across private markets?

A: Liquidity has deepened through multiple channels: REITs and InvITs for real assets, private credit and special-situation funds for pre-exit financing, and active IPO and secondary markets for private equity. These mechanisms make capital recycling and cash realisation more predictable.

Q: How are global allocators adjusting to India’s evolving role?

A: Global institutions increasingly structure India exposure as a dedicated sleeve within Asia-Pacific mandates, spanning growth, buyout, infrastructure, and credit.

Q: What distinguishes India’s private markets today?

A: India has transitioned to a cash-flow capable ecosystem. The interplay between domestic savings and global capital now supports sustainable compounding, making India an enduring component of global alternatives portfolios.

Sources

1. Avendus Capital, “India Goes Alternatives – The Alpha Investment for Maximizing Alpha,” December 2024.