India market is going to act like an AI-hedge: DSP’s Jay Kothari
Get the Finance newsletter
Daily finance — markets, central banks, M&A, the prints that move money. Free.
- Jay Kothari, ED and international business head at DSP Asset Managers, labels India an 'anti-AI trade' after ~40% underperformance vs. emerging markets in one year and ~70% cumulatively over two years — levels he says have 'never been seen before.'
- In the pre-AI phase, India compounded at nearly 20% CAGR versus 5-6% for Korea and Taiwan, and Kothari argues that whenever mean reverts, India has a 'fair chance' to outperform.
- India's tech sector lacks hardware and semiconductors — segments that drove 50% of growth in emerging markets and global markets — while the ACWI's tech weight has risen from 20% to 30% and emerging markets' from 20% to 46%.
- Indian earnings growth hit a 10-quarter high in the latest quarter, and Kothari flags banks as strong with credit growth returning, delinquencies low, and credit costs lower — reversing the Q1 2025 drag from US tariffs, currency depreciation, and FPI selling.
- Large-cap Indian stocks have lagged mid and small caps by ~20% over the past year; within IT, large caps are struggling while mid and small caps are doing well, and quick commerce plus premium retail are bright spots.
- FPIs are selling secondary-market holdings to buy into upcoming IPOs, and Kothari urges retail investors to study fundamentals rather than chase momentum, warning that 30-100% two-to-three-year CAGRs are outliers, not benchmarks.
Why it matters: Indian retail investors who concentrated in global AI/semiconductor momentum face narrow exposure — Kothari notes two-thirds of emerging-market tech returns came from just three stocks. His thesis hands them a fundamentals-based alternative: India's 10-quarter-high earnings print and a reviving bank credit cycle mean the 70% two-year lag could now be the setup, not the verdict.
Ask SkimNews
