Why Foreign Investors Are Still Underweight India: Kotak Conference Insights Reveal Caution Amid Valuations, AI Risks and Iran Conflict<\/p>\n
Global investors remain cautious on Indian equities despite strong long-term interest in the country\u2019s growth story. According to insights shared by Pratik Gupta, CEO and Co-Head of Kotak Institutional Equities, foreign institutional investors (FIIs) are still largely underweight on India and are waiting for a deeper market correction before increasing allocations.<\/p>\n
The cautious stance emerged as a key takeaway from Kotak Institutional Equities\u2019 annual investor conference held in Mumbai, which saw participation from nearly 984 investors representing 240 institutions and 246 companies.<\/p>\n
While the conference highlighted strong global interest in India, many foreign investors attended mainly to assess opportunities and update their understanding of the market rather than deploy capital immediately.<\/p>\n
\n\u201cThe strong foreign investor attendance at our conference was not because they\u2019re looking to buy Indian stocks right away,\u201d said Pratik Gupta.<\/p>\n<\/blockquote>\n
The insights suggest that although India remains structurally attractive, investors are currently weighing factors such as high valuations, slowing growth expectations and fresh geopolitical risks.<\/p>\n
Foreign Investors Wait for Market Correction Before Increasing India Allocation<\/h2>\n
One of the most important messages from global investors at the conference was that many funds have been underweight India for some time and are waiting for a more attractive entry point.<\/p>\n
Several investors indicated they would consider increasing exposure only after:<\/p>\n
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A meaningful correction in Indian equities<\/p>\n<\/li>\n
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Fresh inflows into emerging market funds<\/p>\n<\/li>\n
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More clarity on global economic conditions<\/p>\n<\/li>\n<\/ul>\n
India\u2019s relatively higher valuations compared with other emerging markets have made some global funds hesitant to deploy capital aggressively at current levels.<\/p>\n
Kotak estimates that the Nifty index is trading at around 20 times March 2027 earnings, which remains a significant premium to the MSCI Emerging Markets index.<\/p>\n
This valuation gap is one reason why India may not currently be the top priority among emerging markets for some global investors.<\/p>\n
Also Read : India Seeks US Risk Insurance for Energy Shipments \u2014 Is the Iran War Putting LNG Supplies at Risk?<\/a><\/p>\n
Iran Conflict Adds Fresh Layer of Caution for Global Funds<\/h2>\n
Investor sentiment has also turned more cautious following the recent escalation of geopolitical tensions involving Iran, Israel and the United States.<\/p>\n
The conflict has raised concerns about potential disruptions to global oil and gas supplies, particularly for energy-import dependent economies like India.<\/p>\n
\n\u201cWith the outbreak of the Iran conflict, the foreign investor mood has turned cautious again as India is vulnerable to disruptions in oil and gas supplies,\u201d Gupta said.<\/p>\n<\/blockquote>\n
Higher crude oil prices could increase India\u2019s import bill, widen the current account deficit and push inflation higher \u2014 all of which can negatively impact investor sentiment.<\/p>\n
As a result, global investors are closely monitoring geopolitical developments before increasing their allocations to Indian equities.<\/p>\n
AI Disruption Concerns Continue to Weigh on the IT Sector<\/h2>\n
Another major theme discussed at the conference was the potential impact of artificial intelligence on India\u2019s IT services industry.<\/p>\n
Many US investors raised concerns about whether AI could disrupt traditional outsourcing models and reduce demand for certain IT services.<\/p>\n
Key questions raised by investors included:<\/p>\n
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Could AI reduce demand for traditional outsourcing services?<\/p>\n<\/li>\n
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Could automation lead to white-collar job losses in the IT sector?<\/p>\n<\/li>\n
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How quickly will companies adopt AI-driven automation?<\/p>\n<\/li>\n<\/ul>\n
According to Gupta, investors left the discussions with mixed views, and many remain uncertain about the long-term implications of AI for Indian IT companies.<\/p>\n
These concerns are already visible in market performance.<\/p>\n
The Nifty IT index has declined about 17% in the past month, significantly underperforming the broader Nifty index, which has fallen roughly 5% during the same period.<\/p>\n
This divergence indicates that investors have been rotating away from technology stocks amid rising uncertainty.<\/p>\n
Investors Shift Focus to Data Centre and Power Infrastructure Opportunities<\/h2>\n
While AI-related risks have created pressure on traditional IT services companies, investors are also exploring potential beneficiaries of the technology shift.<\/p>\n
Several investors expressed interest in companies linked to data centre infrastructure and power supply, which are expected to see increased demand as AI adoption expands.<\/p>\n
Sectors attracting investor attention include:<\/p>\n
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Power utilities<\/p>\n<\/li>\n
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Transmission equipment manufacturers<\/p>\n<\/li>\n
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Power cable producers<\/p>\n<\/li>\n
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Backup power and energy infrastructure companies<\/p>\n<\/li>\n<\/ul>\n
The growth of data centres and cloud computing infrastructure is expected to drive significant demand for power and supporting infrastructure in the coming years.<\/p>\n
Domestic Funds Turn Cautious on Small and Mid-Cap Stocks<\/h2>\n
The conference also revealed growing caution among domestic institutional investors, particularly those managing portfolios focused on smaller companies.<\/p>\n
Portfolio managers, especially in Portfolio Management Services (PMS) strategies, are increasingly concerned about the liquidity of certain small- and mid-cap stocks.<\/p>\n
\n\u201cSmall\/mid-cap funds remain very worried about illiquid small- and mid-cap stocks in their portfolios,\u201d Gupta noted.<\/p>\n<\/blockquote>\n
Although small- and mid-cap stocks have seen corrections this year, Kotak believes valuations in many companies within these segments remain stretched.<\/p>\n
If investor redemptions increase, illiquid stocks could face sharp price corrections.<\/p>\n
Limited Upside for Nifty in the Near Term<\/h2>\n
Kotak Institutional Equities expects only modest upside for Indian equities in the near term, primarily due to elevated valuations.<\/p>\n
While strong domestic inflows and India\u2019s structural growth story continue to support the market, significant gains may be limited unless earnings growth accelerates.<\/p>\n
Key downside risks highlighted by Kotak include:<\/p>\n
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Prolonged conflict in the Middle East pushing oil prices higher<\/p>\n<\/li>\n
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A slowdown in global economic growth<\/p>\n<\/li>\n
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Weak monsoon affecting domestic consumption<\/p>\n<\/li>\n
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Slower inflows into equity mutual funds and retail investment channels<\/p>\n<\/li>\n<\/ul>\n
These factors could influence investor sentiment and market performance in the coming months.<\/p>\n
Here\u2019s What Happened Today and Why Traders Reacted<\/h2>\n
Investor sentiment toward Indian equities was shaped by several important developments highlighted during the conference.<\/p>\n
Key triggers include:<\/p>\n
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Foreign investors remaining underweight on India<\/p>\n<\/li>\n
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Concerns about high market valuations<\/p>\n<\/li>\n
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Rising geopolitical risks due to the Iran conflict<\/p>\n<\/li>\n
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AI disruption fears affecting the IT sector<\/p>\n<\/li>\n
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Caution among domestic investors toward small- and mid-cap stocks<\/p>\n<\/li>\n<\/ul>\n
These factors collectively contributed to a more cautious outlook among both global and domestic investors.<\/p>\n
What This Means for Investors and Market Strategy<\/h2>\n
The cautious stance of foreign investors suggests that short-term market volatility may continue, especially if geopolitical risks persist or global liquidity conditions tighten.<\/p>\n
However, analysts believe India\u2019s long-term structural growth story remains intact.<\/p>\n
Kotak continues to prefer sectors with strong domestic demand and earnings visibility, including:<\/p>\n
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Large private sector banks and NBFCs<\/p>\n<\/li>\n
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Life insurance companies<\/p>\n<\/li>\n
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Telecom operators<\/p>\n<\/li>\n
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Domestic-focused pharma and healthcare firms<\/p>\n<\/li>\n
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Non-ferrous metals<\/p>\n<\/li>\n
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Residential real estate<\/p>\n<\/li>\n
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Airlines and hospitality<\/p>\n<\/li>\n<\/ul>\n
At the same time, the brokerage remains cautious on certain consumer stocks, oil and gas companies and chemical firms due to valuation and macroeconomic risks.<\/p>\n
For investors, the current environment highlights the importance of selective stock picking and disciplined portfolio allocation, as global uncertainties and valuation concerns continue to shape market sentiment.<\/p>\n
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- Nifty 50<\/a><\/li>\n
- Bank Nifty<\/a><\/li>\n
- Sensex<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"
Why Foreign Investors Are Still Underweight India: Kotak Conference Insights Reveal Caution Amid Valuations, AI Risks and Iran Conflict Global investors remain cautious on Indian equities despite strong long-term interest in the country\u2019s growth story. According to insights shared by Pratik Gupta, CEO and Co-Head of Kotak Institutional Equities, foreign institutional investors (FIIs) are still […]<\/p>\n","protected":false},"author":4,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[615],"tags":[],"ppma_author":[1331],"class_list":{"0":"post-22451","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-stock-market-news"}," _eael_post_view_count":0,"authors":[{"term_id":1331,"user_id":4,"is_guest":0,"slug":"sourabh","display_name":"Sourabh Sharma","avatar_url":{"url":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png","url2x":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png"},"0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":""}],"_links":{"self":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/22451","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/comments?post=22451"}],"version-history":[{"count":1,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/22451\/revisions"}],"predecessor-version":[{"id":22453,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/22451\/revisions\/22453"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media\/22452"}],"wp:attachment":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media?parent=22451"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/categories?post=22451"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/tags?post=22451"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/ppma_author?post=22451"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}