Why FPIs are careful with India and DIIs see a five-year bargain

Copyright © HT Digital Streams Limit all rights reserved. FPIs, Capeex and earnings will drive the markets in Samvat 2082, says Kotak Mahindra AMC’s Nilesh Shah Dipti Sharma 6 min read 13 Oct 2025, 05:30 IST Nilesh Shah, managing director of Kotak Mahindra AMC. Summary Nilesh Shah, managing director of Kotak Mahindra AMC, sets out the three main forces for Samvat 2082: Foreign portfolio investor flow, revival of private capital expenditure and a double-digit growth in earnings. India is a market where the exit is easy, but entry is difficult, says Nilesh Shah, managing director of Kotak Mahindra AMC, the fifth largest mutual fund based on quarterly assets under management (AUM). From Kotak Mahindra AMC’s overall AUM of £ 5.26 trillion, the equity is £ 3.12 trillion. It is a classic fear of the fear of the miss of (FOMO) scenario: If FPIs haunt, the fear will win; If DII’s FOMO creates under FPIs, they can convert buyers and increase the market, he explained. “Currently, the market is in a sideways phase without a major stir, which can continue unless there is a great correction.” In the longer term, the fundamentals will prevail, he believes, adding that the biggest driver for India’s stock market is earnings. He added: “If earnings show up to double digits – supported by a US tariff agreement, domestic stimulus and a revival in the private captex – the market will rise”. Edited excerpts: Last Samvat was not exactly a crossword puzzle for the Nifty; It has run the most global markets. What is your lecture for the coming year, and is India still the investment story? FPIs selling India do not dispute its growth; They are confident that India will contribute to global growth with the US and China. Their concern is valuation. FY27 Nifty 50 EPS is expected to be around £ 1,200, with a Nifty at 24,000 – a price of a price to earnings (p/e) of 20. Sellers believe that EPS will continue to grow and reach £ 2,000 in a few years, but the question is whether the P/E will drop at 20, as will be seen in China. If it drops, Nifty can still be 24,000, even after the earnings have gone up – which means it is no returns. FPIs are cautious for three reasons: Earnings growth in the last six quarters is single-digit, while valuations are double-digit; US rates harm the economy; And IPO offer is high, with promoters, insiders who best know their businesses. On the other hand, DI’s (domestic institutional investors), which india consider India in the short term, but the cheapest emerging market over a five -year -old horizon. The growth story and management remain intact. While investors can invest in markets such as China, Korea or Brazil today, they can return to India if we maintain earnings growth. India is a market where exit is easy, but access is difficult. One can easily discuss the profits, but it requires sellers. It is a classic fear of FOMO -SCENARIO: If FPIs haunt, the fear will win; If DIIs create FOMO under FPIs, they can convert buyers and increase the market. Are there any investment themes or ideas that you have underestimated over the past year or did not give enough weight? We were clumsy about consumption last year, and it played well, while our IT bets are not as expected. Short -term, you may be right or wrong, but what is important is how much exposure you take if you are right or wrong. We continue to consume a lot because the government puts money in the pockets of the citizens. Taxpayers, consumers, lenders and government employees will have more money to spend. If this money is spent domestically, it will increase the question, create jobs and support the consumer theme. We continue to consume a lot because the government puts money in the pockets of the citizens. It didn’t work out either, but opportunities were left. Many IT firms in the mid-chap use AI to deliver faster, cheaper and better solutions. While US policy adds some uncertainty, Enterprise AI offers a significant long -term event. We believe that the IT sector will offer some opportunities in correction. Despite the H-1B Visa fee increase? The H-1B changes affect more US businesses, but there is a loophole that allows the Department of Home Security to provide exemptions. It is unlikely to have a significant impact on Indian IT firms. They have a much bigger problem with AI evolution and the US economic situation. What would you think would be the most important growth car for Indian shares? Within the near term, it’s about fund flow. FPIs sold; Their sale can create fear among buyers, while retail investors through SIPs (systematic investment plans) regularly buy. Their buying can cause FOMO under FPIs. In the longer term, the fundamentals will prevail. The largest driver for India’s stock market is the growth of earnings. If earnings show up to double digits – supported by a US tariff agreement, domestic stimulus and a revival in private capital expenditure (CapeX) – the market is likely to rise. Currently, the market is in a sideways phase with no major stir, which can continue unless there is a great correction. At a forward p/e of 21, India is already a premium market worldwide. We stand on Mount Everest – difficult to move on. Yields do not come from valuations that expand from 21x to 25x or 30x, but from the growth of earnings. Earnings growth can range from high single digits to low double digits, resulting in similar yields. Shares may vary, but the broader market will progress slowly, such as a turtle. Is there a star risk that you are most concerned about? The biggest risk to me is complacency. We are used to a 20x PE, but to justify it, we must continue to deliver excellent growth in earnings. As Virat Kohli is expected to be centuries, we will have to deliver excellent achievement. India deserves a premium valuation because its earnings growth and yield on equity are better than that of its peers. To maintain the lead is crucial – stocks remain slaves for earnings, as Warren Buffett said famously. India deserves a premium valuation because its earnings growth and yield on equity are better than that of its peers. Are there sectors or themes that you are excited about in the new Samvat year? We still believe that the consumer theme has a lot of potential. But remember, these consumers do not spend basic necessities, and their savings are not enough to buy a home. The question is where will they spend? This can be about discretionary experiences – for example, choosing airlines above trains. It may be home improvement by using a few savings to upgrade their homes. It can be in health and education, where the search for more value -adding services is a priority. Or it can be traveling and tourism. Wherever this money flows, the part of the consumer discretionary sector is likely to perform well in the coming days. What about sectors like defense? Defense businesses will grow – there is no doubt about it. We had problems with two neighbors earlier; Now, that’s four. Investment in defense is therefore essential. However, valuations are demanding. In our opinion, the best positioned businesses are those that serve both domestic and global markets, so they are not just dependent on India’s defense budget. Secondly, their products should be futuristic – tanks making may not add that much value, but drones and missiles are much more valuable. Third, operating leverage: firms with extra capacity can use export markets, and if their products meet the demands of modern warfare, it is likely to perform well. I have noticed that investors have been viewing gold and silver lately, not just as hedging tools, but as growth assets. Commodities cannot be valued like bonds or stocks. Gold pays no dividends, no bonus, no cash flow. So, how has gold and silver changed over the past five years? After the 2022 Russia-Cukraine war, $ 500 billion of Russia’s foreign exchange reserves was frozen, and the interest on the amount is allocated to Ukraine. Now, the central bankers worldwide question the safety of their reserves, because if a mighty country like Russia can have its money frozen, what can happen to smaller countries? As a result, many of their foreign exchange reserves have diversified into gold, and some consider silver. As long as central banks continue to buy, prices can rise. But if they stop or start selling, prices will fall. Therefore, it is essential to monitor the buying activity of the central bank when investing in gold and silver. 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