Indian stocks have lagged behind global markets, showing a nearly 70% underperformance over the past two years. Jay Kothari, Executive Director at DSP Asset Managers, noted that this trend has made India an 'anti-AI trade.' The country lacks key technology sectors that have fueled growth in other regions. Kothari pointed out that while Indian companies show strong earnings and return ratios, the absence of hardware and semiconductor industries has held back their performance.
Key Details
Kothari believes the recent surge in IPOs could affect how capital is allocated in the market. More IPOs may draw funds away from existing stocks, causing foreign investors to sell off their secondary holdings to finance IPO purchases. He warns retail investors against chasing hype-driven investments and stresses the need for careful research or expert advice.
Background
Despite the underperformance, Kothari thinks a turnaround is possible. He highlighted that India historically grew at about 20%, while markets like Korea and Taiwan grew at 5-6% before the AI boom. He said, "Whenever this mean reverts, we believe India will outperform." He also noted that recent earnings growth reached a ten-quarter high, suggesting a possible change in market trends.
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The rise in IPOs could cause a short-term drop in existing stock prices as capital shifts. Sectors tied to technology may experience more volatility as investors rethink their portfolios.
Keep an eye on upcoming earnings reports from major Indian companies. These reports could further affect market sentiment and investment strategies.
Based on reporting by: livemint.com