Kotak Institutional Equities flagged off the Chasing Growth 2025 conference and saw widespread participation from both local and global investors. Uday Kotak, Founder & Director of Kotak Mahindra Bank, delivered the inaugural address focusing on India’s economic and financial landscape in the Trump era.
Here is a quick look at the key takeaways from his address-
#Changing trends in FII flows
According to Uday Kotak, there are wide-spread debates on the impact of these changes, “The primary change has been felt in capital flows, with the current strength of the US dollar stemming from increasing investor inclination to hold dollar assets.”
The FII flows so far in 2025 have been rather discouraging. The net FII selling this year is already above Rs 1 lakh crore, at Rs 1.15 lakh crore. Of this Rs 87,000 crore was sold by FIIs in January when the Dollar Index hit a high of 110. In February, though the Dollar Index has moderated to 106 levels, FII flows continue unabated. Total outflows in February is just a tad shy of Rs 29,000 crore.
“This is a clear change from the previous era, when investors were looking at diversifications across asset classes. Currently, the US stock market accounts for about 70% of the global market cap,” observed Kotak
Since the opening up of the foreign equity portfolio account in 1995, India currently has roughly
(1) $800 billion of stock of foreign capital through FPIs
(2) $900 billion-1 trillion of FDI stock
(3) $500- 600 billion of foreign commercial borrowings.
Kotak pointed out that in that context, India has adequate forex reserves at $560 bn (adjusted for forward positions). He believes, “India has more than 2X reserves on repatriable foreign assets. India’s current account is well under control at 1.2-1.3% of GDP ($50 billion of deficit).”
#Markets resilient
Speaking on the markets, Uday Kotak cited that “Indian markets are resilient and at scale for foreign investors to move in and out.”
Interestingly, the markets are currently taking a breather within a tight range after the recent selloff. The Nifty and the Sensex are down around 3% each for 2025 so far with the Nifty struggling around the psychologically important 23,000 mark. Most market observers have attributed the downward trend to the relentless FII outflows coupled with key fundamental concerns like muted earnings and slowdown in growth. According to the recent report by Kotak Institutional Equities, ‘sharper correction in midcaps and smallcaps’ are likely going forward.
#Trump tariff to be an important issue
The big news this morning has been US President Donald Trump saying that he intends to impose auto tariffs “in the neighborhood of 25%” and similar duties on semiconductors and pharmaceutical imports. Speaking to reporters, as per Reuters report, Trump also reiterated that while tariffs could be “25% or higher”, it is also expected to rise substantially over the course of a year.
While analysts are still awaiting the exact roadmap of the tariff structure, Uday Kotak believes that “tariffs will become another important issue, with India imposing around 10%
tariffs on American goods, while the US imposes 3% tariffs on Indian goods. As tariffs hit other
producing nations, they will have surplus capacity to sell to the rest of the world at a much cheaper
rate. If any of the commodities from surplus production countries are 30-40% cheaper than India,”
Speaking in details about the right strategy for India, Kotak pointed out that in his view, “India cannot afford protectionism; India has to take advantage of changing times and make Indian industry competitive rather than protective. The new world will give limited options to run large current account deficits.”
Meanwhile, India currently has $40 bn of trade surplus with the US. He believes US President “Trump’s intent to correct the US trade deficit with India may put an additional load on India’s CAD. India’s trade structure may thus need to change across economies to rebalance its trade.”
He emphasized the need for India to
(1) Improve productivity
(2) Avoid excessive protectionism
(3) Increase manufacturing as a percentage of GDP.
#Policy execution crucial
Uday Kotak also highlighted the importance of execution in both macro- and microeconomic policies. He believes that “India will need to go through a gradual fiscal consolidation. India needs to move from micro-management/over-regulation and move toward ushering growth and competition.”
According to the recent Budget estimates, the FY26 fiscal deficit is seen trending lower to 4.4% coupled with a moderate pace of GDP growth.
He addressed concerns about excessive financialization, explaining that it can hurt the economy when investors move their savings into equities without understanding valuations.” He also discussed the implications of artificial intelligence and emphasized the “need for India to create new opportunities and jobs in the post-technology, post-AI world”.