Despite foreign investor sentiment towards India being at its worst ever, some of the country's most seasoned market veterans remain confident that equities can deliver decent returns over the medium term. Their optimism rests on a simple argument: India's underperformance has been driven by an unusual convergence of factors, many of which may not recur together, while valuations have corrected and earnings growth remains reasonably strong.
Based in Singapore, Prakash founded Amansa Capital in 2006. The firm runs a concentrated, India-focused long-only equity strategy. Before setting up Amansa, he spent six years in the 1990s as an executive director and portfolio manager at Morgan Stanley Asset Management, where he managed the Morgan Stanley Growth Fund. He subsequently worked at the Government of Singapore Investment Corporation (GIC) and Temasek Holdings. His perspective carries particular weight given his nearly three decades of experience as a global investor in Indian equities.
Not just Prakash; others agree that foreign investor sentiment is at an extreme low. Ridham Desai, managing director of Morgan Stanley India, acknowledged the severity of the backlash. “The FPI sentiment towards India is probably negative. I should say, it's probably never been as bad as it is today,” he said at the News18 Rising Bharat Summit in Mumbai.
Yet the veterans argue that this sharp loss of relative standing needs to be understood in context. It reflects not just a deterioration in India's prospects, but also the unwinding of excessive valuations, a relative earnings advantage shifting towards other markets and a temporary squeeze on India's external balances.
The first reason was the high starting valuation. At the market peak in 2024, Indian equities traded at roughly twice the valuation multiples of emerging markets. That premium left little room for disappointment. As earnings growth moderated and other emerging markets began to outperform, the valuation gap became increasingly difficult to justify.