Lack Of AI Theme Is Just One Reason Why FIIs Are Selling Out of India, Says Sridhar Sivaram

追加: 2026-05-14

[00:00:09]Welcome to a very special edition of market masters. Uh one question that repeatedly keeps coming up when I speak to foreign investors, Indian investors, mutual funds is that the currency is cheap, Indian shares are at valuations far lower than say two years ago or even one year ago. Then what is keeping the foreign investor away? Why is it that even year to date it is a 25,000 cr sale that we hear from foreign funds? To answer some of these quandies, I have with me someone who's watched the Indian markets for over three decades but more importantly is in constant touch with foreign investors. Sidar Shivram, investment director, NAM holdings. Sidar as always, thank you very much for inviting me.

[00:00:53]>> Okay. So this really the question you know we heard that Ruchir Sharma interview as well. Is AI the only reason why India is the shunned market? No.

[00:01:04]>> So I I I think AI is one of the reason it is can't be the only reason. I mean just a simple example Latin America has done very well and they are commodities.

[00:01:13]So and commodity there's a commodity super cycle going on. So it's earnings which is more important. So if you ask me what is the overarching theme it is countries where earnings growth have been strong they have done well. So if you look at the best performing uh countries within say emerging markets it's Korea Taiwan because they are in the super cycle of chips and DRAMs and HBMs and all those and they're sold out uh and their earnings uh I mean as we speak uh you know you know the numbers are staggering that you know just Samsung will make a profit of about $250 billion. This is profits uh profit after tax >> 250 billion billion. Just to put in context, India Inc. makes $200 billion of profit. Just one company, Samsung makes will make $250. SKHenix roughly about 150 and TSMC say 100. So these three companies will make $500 billion of profit. Cash profits will be almost $3400 billion. And I just, you know, was chatting with one of my ex-colagues in Singapore and uh he mentioned that these numbers are correct, but they're getting upgraded very fast. So this is >> which will be more than 250 billion.

[00:02:28]>> Yeah. So it'll be more as a combination as these three companies will make more than $500 billion of profit just for this year and they're even sold out for 18 months. So it's not like as if their earnings are going to fall. And just to put things in context that the Korean market after you know almost 200% rise that we they've seen in the last one year in dollar terms they're still trading at around 8p. I will caveat that there is this a cyclical business. So th this goes in a cycle. So the demand currently is very strong. But uh as the demand fades away, you know these >> it's a one trick pony.

[00:03:04]>> It's a one trick pony. But they have invested a lot in R&D and they are manufacturing very high-end chips and DMs which others are not able to do and uh they are significantly getting they're making huge cash flow. So these are not you know the circular trades that you know I give you order you give me order. These are actual production actual cash flows. So I think that is the challenge that India is facing that India's earnings growth the best case is 15%. Uh and if the war continues the way it is it's highly possible that that number may get downgraded to say 10 11%.

[00:03:44]Uh whereas the competing markets you're talking of 100% earnings. talking of upgrading of earnings >> and upgradation whereas we are talking of downgrades. So I think the challenge is earnings for India uh and you can add all the others the currency depreciation and uh you know India's taxation I mean those are the you know the irritants more than anything else if earnings come back and in fact pre-war we were very optimistic that I was coming to look at the earnings I mean Bajage auto just today clearly outshone uh expectations of the market even if you you forget Jan Feb March look at the April auto sales I mean 30% higher for almost all the passenger car vehicles likewise the two wheelers likewise the tractors uh so with that and with the rupee as cheap as you know 95 rupees per dollar does it look like we are at an inflection point >> so I think if the war ends because there is a collateral damage belief that India has a higher larger collateral damage because of the war not because so much of the oil yes oil at 100 hurts us more the availability of the gas And I've spoken to many companies where there is a challenge that they are facing. So they are you know quickly trying to shift from you know gas to furnace oil or any of the other modes. So it is an irritant. It can have an impact on their margins. Uh so for the moment they want to be running. I mean there's a large restaurant in Naran Point where we go regularly. They don't have half the uh you know menu uh thing because uh the gas availability is very poor. So these are real uh challenges that people are facing and this is at a smaller level so larger companies are facing larger issues. So I think as the war ends and maybe if the AI uh you know mania abates a bit uh India will be a beneficiary. I think more than anything if our earnings come back forget what is happening in the rest of the world. If our earnings come back I think uh foreign investors and other investors will also come back.

[00:05:47]So our uh earnings to valuation 8 uh 12 months back was completely out of sync. Today it's far more reasonable seen.

[00:05:56]>> Yeah. But there is a challenge that the earnings could get downgraded if that fear is abated and we start to see uh you know earnings growth come back. I think this market can come back.

[00:06:07]>> Okay. For those of us who are you know likely to invest only in uh in India, I guess you know going through LRS route and the mutual funds have already been stopped. They cannot invest for every individual investor to diversify is not something that is that easy. So for an India investor where are you seeing relative bargains? Let me start with your favorite team which you played very successfully. PSU banks doing much better than private banks. There was a period. Is that trade over now?

[00:06:38]>> Yeah. So I would say broadly yes. So I'm no longer as bullish as I was with PSUs as a trade as I was say uh >> three months was still superb. So PNB day before yesterday but I'm looking at growth. Uh so the absolute numbers are great but the growth is fading. uh I think the challenge that is that these PSU banks have created for the banking sector is if you look at the top six PSU banks as an aggregate they're about 60 lakh cr of uh you know loan book and if you take the top three private banks they're also roughly 60 lakh crores or so they're roughly you know on a like to like I'm keeping SBI away for the moment uh and if you take the last quarter numbers the retail book of these six banks grew at 23% versus the private sector bank growing at single digit. So what has happened is these PSU banks are bringing down or bringing down the profit pool of the industry because they're lending home loans at say 7 seven quarter.

[00:07:37]>> It's true.

[00:07:37]>> The the vehicle loans uh rates have literally crashed almost veered away from it.

[00:07:44]>> So they have stepped away. So what is happening is a large part of the pool of loans which was available for private sector is they literally vacating space.

[00:07:53]And you know one of the CEOs of private sector banks when I asked him this question he told me that you know the technology has been democratized. I said how what do you mean by that? He said uh earlier as a private sector bank I had the advantage of assessing the uh risk of a retail loan far better. Now with say account aggregator with the civil score uh that advantage that I had is now is democratized. So everybody has the same data. Everybody's looking at the same thing and because of technology they can write so many more retail loans. In the earlier times they would have had you know physically you have to fill forms now you don't have to do. So I think long uh you know uh answer to the point is that >> and the advantage is over now.

[00:08:38]>> The advantage is over and which is why the private sector uh you know the larger private sector banks are struggling with growth.

[00:08:46]>> Okay. So if they get growth then they're struggling with profitability like we saw in this quarter that loan growth was great but when you look at the NI growth or when I when you look at the operating profit growth they're far lower than the loan growth which tells me that you're growing faster but at a lower profitability. So I think that's a challenge for this uh sector as such.

[00:09:06]>> Okay. Yeah. I guess investments in technology have to increase with even claude mythos kind of things coming in.

[00:09:12]So what would be your sector of choice for the market? It has been power. you look at it YTD monthto date year to date 2025 onwards PAR is an outstanding winner have we milked it enough >> so I would say that first the mid midcap uh funds uh midcaps in general uh they have corrected a lot and there are very interesting opportunities so if you when you ask me where should investors look at maybe midcap funds look very interesting because they've corrected almost 30 40% uh if you look that from last 18 months there have been no performance and some of these companies are very looking very interesting. So obviously if you're investing in a midcap fund uh uh you know the fund manager getting a diversified >> yeah the fund manager will have the skills and he he will be doing a good job of finding out. You mentioned power.

[00:10:02]Yes power is a interesting theme and uh even there a lot of companies had corrected uh so we are seeing opportunities in the power sector.

[00:10:12]Pharmaceutical is the other sector where which we like especially the GLP-1 story which is the diabetes and the uh you know weight loss drugs and there are tons of companies associated with that.

[00:10:22]Uh we think that it's a you know multi-billion dollar opportunity because almost 150 countries uh this is going off patent and many companies are there.

[00:10:31]So pharma in the CDMO space also there is a lot of opportunities uh that we are seeing. We like commodities in general because we think that we are in a super >> steel and hindalo are all have all been out >> I think in gerally we think commodities uh we will be in a super cycle. You mentioned about power. Power is a global theme. You know there is a power shortage globally and if this AI mania data center mania has to continue every company has every country has to invest in power and US in particular hasn't invested in power infrastructure for decades now. Now they are upgrading you know power. So power equipment equipment companies globally are sold out for 18 months. There is no capacity. If you want large transformer uh there is no uh it's not available.

[00:11:13]>> So power equipment is >> power equipment is where what we like not the utilities uh utilities have also done well by the way but uh if you ask me my preference is for power equipment.

[00:11:23]>> Yeah Adani power Tatapar Adani green NTPC green all of them have done exceptionally well as have BHL's and uh you know GE and D all those companies.

[00:11:34]Okay, a final question. You know, we we didn't speak much about uh the uh e-commerce and when I say e-commerce, I mean everything from PB fintech to PTM to uh eternal and you know the entire guys who have grown on the back of digital India. Are they still they were once the flavor uh you don't see any pockets there?

[00:11:55]>> No, there are pockets there. Uh we do like some of these companies uh you mentioned some of the companies in the financial space also. Uh there are companies in the insurance space also which uh which use technology. Uh some of these companies are looking interesting. We like the companies where we can see a uh road to profitability.

[00:12:14]>> Uh we don't want to just buy in hope. Uh so if there is a road to profitability we're willing to engage slightly old school uh in terms of uh investing. Uh but uh the way some of these stocks have they have done well. I mean so it's uh hats off to many of these companies for creating uh you know totally new business model which is the point that you know many times when we uh speak to uh entrepreneurs in uh about you know investing in R&D investing uh in general the point they make is you uh stock market guys don't give us uh valuation if there is uh no roe that is proved wrong because you know newer investors will come >> who will uh do which is my issue with you know some of the IT companies that you should have invested. You didn't uh you didn't do it when you should have you know done what others did.

[00:13:05]>> As a country we have not done perhaps the right investments in technology.

[00:13:09]Just a final word uh 26,000 this year for Nifty.

[00:13:13]>> I I am no expert on giving a number but I would say that you know if uh over a medium period we should uh deliver slightly more than nominal GDP.

[00:13:23]>> Okay. Uh so if that is 10 12% then over the next four five years we should average there. Obviously there'll be different between different uh >> periods. Oh absolutely. Thank you very much Srid Sharam for pointing out the pockets that we should keep our eyes peeled on and realize why it's not just an AI. It's a little more than that.

[00:13:42]It's earnings growth that we should keep our eyes peeled for. Uh that's a very interesting conversation that has to wind down because we are out of time after the break. Chartbusters.