‘Emerging market’ is a term used to describe a developing country, in which investment is expected to achieve higher returns at greater risk. While risk is generally higher, market pricing is often inaccurate. We believe that risks in India are lower relative to comparable emerging markets because Indian market is underpinned by a strong long-term growth story based on strong demographics, established democratic systems as well as improving growth potential due to cyclical recovery and capex pick-up. Moreover, India’s prosperity levels lag behind other emerging markets, providing ample room for catch-up. But, India still faces three key issues that raise its risk profile — institutional mechanisms, inflation and weak external account. That being said, if India continues to make significant advancements in risk parameters, risk perception will improve and it can move closer to developed markets in terms of cost of equity.