Foreign investors are not even thinking of India right now, as they are thinking more in terms of their risk buckets, according to Praveen Jagwani, CEO of UTI International. He tells Ananya Grover that the Sensex is likley to touch 100,000 by 2026-end. Excerpts:
1, Are foreign investors interested in India market?
The upside to the decision of investing in India is very little and downside is huge, so asymmetric risk profile. India has been flat for the last one year. America’s market cap is 49% of the world but its weight in the MSCI All-Country World Index is 65%. All of these indices are supposed to be market cap weighted, so in an ideal world, they should be 49% of the index but they’re punching way above their weight. India’s market cap is 4% of the world, our weight in the index is 2%. So, we’re punching way below our weight. Is the world investing at least 2% in us? No.
They’re investing about 66 basis points. So, if you can say we are worth 4%, we’re being told we are 2%, but we’re being treated like 66 basis points. It’s not meaningful enough for people dedicate specific resources to research, study, and invest. In the last few years, you only needed to get one thing right in your investment portfolio–America. 40% of the S&P, is just the top 10 stocks. So, you just have to get the top 10 stocks right, the rest of it makes no difference. That’s the degree of polarization of global market cap. What really needs to happen is India needs to become a specific enough allocation in a global portfolio construct, the only way that happens is when USA corrects and the bubble bursts.
2. Do you think there is a bubble?
John Maynard Keynes, the famous economist, once said, markets can stay irrational longer than you can stay solvent, which means we that the US is on the edge of an imminent crash but the bubble can continue expanding for many quarters, we could lose hope. It hasn’t come true because the Fed can continue to support the market. The bubble is only going to grow bigger. So, until there’s a realistic resolution of that, it is very difficult for India to be meaningful.
3. Why do you think flows are going to China?
It is a narrative game and China’s valuation is cheap. China has been the global manufacturing powerhouse for two decades and it has managed the external narrative exceedingly well. Sure, China has made policy errors internally and done self-goals, and their economy is in shambles but the sheer size of the Chinese economy means you can’t ignore it. The West believes in the narrative, looks at the cheap valuations of China and they think this is only temporary, China’s going to come back. So, the narrative works in their favor. A lot of the money that has come into not just China, but Taiwan and Korea, this year, is essentially an extension of the AI trade. Taiwan Semiconductor Manufacturing Company, is 45% of the Taiwanese index. Here, the biggest company is Reliance Industries, that’s about 10% of the index. Korea, similarly, their semiconductor manufacturing companies, other tech chip manufacturers, they’ve gone up. China has also got rare earth, batteries, because of the EV revolution. Money has not gone to all emerging market countries. India didn’t get any, Brazil didn’t get any, South Africa didn’t get any. This is just a tech play.
4. What is your assessment of valuation in India compared to other emerging markets?
Super expensive, there’s no question. Rest of emerging markets, are very attractive from a valuation perspective, but they don’t have earnings either. The economies of Brazil, Mexico, Turkey, South Africa, very unidimensional and China, of course, is imploding. So, they don’t have the fundamental strength to merit higher valuations. India’s had a rough seven eight quarters where demand fell off and it took a nap for a year and a half but the most recent earnings quarter, we’ve had earnings climb back into double digits, that’s what has created a fair amount of excitement, which is why in October we had positive flows from FPIs. There is some semblance of return of the foreign investors that, yes, India is coming back. So, from a timing perspective, it might be good.
5. Do you think the money now is moving away from US?
Selectively. S&P is still at its lifetime high, except for the correction that’s happened in the last three or four trading sessions. Despite the fact that in 2025, there has been a US dollar depreciation of roughly 7%. So, the two mega trends in the world: one unleashed by Trump and his trade wars is de-globalization and the second is de-dollarization. The world typically is worried about the US because of its enormous debt, which cannot be repaid, the only solution is cheapen your currency. Even eurozone is struggling from an economic perspective, but euro has become stronger, not because it’s done anything smart, just that against the dollar, dollar is becoming weaker. India has been in this uniquely unfortunate position that foreign flows to India on both the FDI side and FPI side have been so anemic this year that the rupee fell.
6. How are you seeing the India market going forward?
When markets reach extremes, they mean revert. The next move is that India has to go up and US equities correct. The next six to eight months, when this starts to unfold, it’s going to be magical for us, for India in general and for UTI in particular. While short term is really difficult to predict because it is dependent on what the US will do but by 2026 end Sensex will touch 100,000 points. It’s a consumption story, discretionary spending, FMCG, pharma. We like these sectors. IT, not so much because the world is slowing down and in such a scenario, IT spends don’t tend to increase. Financial services will continue to do well as credit expands domestically
7. Which products are foreign investors into?
Currently, the flows are into active. Our passive product is in fixed income, and there’s little interest in Indian fixed income at the moment. All foreign money that comes to India, 820 billion of it is coming in four buckets: India specific funds, Asia ex Japan funds, emerging market funds and the biggest component is global allocation funds The most volatility of flows we have seen is in the middle two buckets – EM & AxJ funds. Only 11% of global FPI allocation to India is really a premeditated India decision. Allocations to EM funds or Asia x Japan are Risk decisions (as in Risk on or Risk Off) They’re not even thinking of India. They’re thinking in terms of their risk buckets.