Rishabh Nahar of Qode Advisors said FII buying in Indian equities could rise in Samvat 2083. He noted that earnings growth, lower crude prices, and a weaker US dollar might attract global investors. "The biggest opportunities are often found where expectations are low, not where narratives are loud," he said.
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Rishabh Nahar, Partner and Fund Manager at Qode Advisors, believes that the likelihood of FII buying has improved considerably.
India has underperformed several emerging markets, foreign ownership has declined and valuations have become more reasonable. These factors create an attractive opportunity for global investors to revisit Indian equities, he said in an interview with Moneycontrol.
According to Nahar, a combination of accelerating earnings growth, moderating crude oil prices and a weakening US dollar could trigger substantial foreign inflows into Indian equities in Samvat 2083.
Nahar also highlighted his top three investment themes for Samvat 2083, including domestic consumption and financial services. "The biggest opportunities are often found where expectations are low, not where narratives are loud," he said.
Do you agree that the worst is over for Indian equities following Trump’s decisive defeat in the US midterm elections?
The election outcome is certainly a positive development, but I would be cautious about declaring that the worst is behind us. Markets don’t necessarily bottom when uncertainty disappears; they bottom when expectations become sufficiently pessimistic. The bigger positives for India are the potential moderation in geopolitical uncertainty, lower crude prices and a weaker dollar.
However, we must remember that India cannot rely on global sentiment alone. The market needs domestic earnings to deliver. I would say the risk-reward has improved meaningfully, but the confirmation will come from earnings, not elections.
From here on, do you believe the market rally will need to be backed by consistent earnings growth to sustain its upward momentum?
Absolutely. The easy money made through valuation expansion is largely behind us. Over the long term, stock prices follow earnings, and eventually every market has to reconcile with that reality. We have seen periods where liquidity and optimism pushed valuations significantly ahead of fundamentals. That is not a sustainable way to compound wealth.
The next leg of the Indian market rally must be earnings-led. I would rather own a business growing earnings at 18 percent available at a reasonable valuation than a business growing at 5 percent trading at 50 times earnings.
Given the improving global sentiment and the potential recovery in corporate earnings, do you expect FIIs to resume buying in Indian equities and turn net buyers in Samvat 2083?
I believe the probability of FII buying has improved considerably. India has underperformed several emerging markets, foreign ownership has declined and valuations have become more reasonable. This creates an interesting opportunity for global investors to revisit India.
The recent buying is encouraging, but one should not extrapolate a few days of inflows into a sustained trend. Global capital is opportunistic; it moves wherever the risk-adjusted return is most attractive. If earnings growth accelerates, crude moderates and the dollar weakens, India could see substantial foreign inflows in Samvat 2083.
What is your assessment of the September-quarter earnings performance, and what does it indicate about the earnings trajectory in the second half of FY27?
The September quarter is encouraging, with early results suggesting an improvement in both revenue growth and profitability. A sample of 240 companies reported revenue growth of 23.2 percent and profit growth of 28.8 percent, although sectoral dispersion remains significant. What matters more is whether this momentum is broad-based and sustainable.
I expect the second half to benefit from improving consumption, operating leverage and a favourable base in select sectors. However, investors should distinguish between genuine earnings growth and profits driven by commodity cycles or one-off gains. Earnings quality matters as much as earnings growth.
Do you see any possibility of contagion risks emerging in the US over the next three to six months, particularly amid the ongoing sell-off in AI stocks?
The bigger risk is not the correction in AI stocks itself, but what happens if expectations around AI monetisation fail to justify the enormous capital expenditure. We are witnessing unprecedented investments in data centres, chips and infrastructure, and a significant portion of this ecosystem is increasingly dependent on debt financing.
If returns disappoint, the impact could spread beyond technology into credit markets and corporate investment. However, I would distinguish between a valuation correction and a systemic crisis. AI is a genuine technological shift; that does not mean every AI investment is a good investment.
Do you believe the downside in the Indian IT services sector is largely priced in, making current valuations attractive for investors looking to accumulate technology stocks?
The sector has certainly corrected meaningfully, but a lower stock price does not automatically mean a cheaper business. AI is challenging the traditional linear relationship between employee headcount and revenue, which has been the foundation of Indian IT services for decades.
The market is still trying to understand the implications for pricing, margins and long-term growth. I would be selective rather than buy the entire sector. Companies with strong client relationships, domain expertise, balance sheets and the ability to monetise AI will emerge stronger. The opportunity is in identifying tomorrow’s winners, not averaging down indiscriminately.
What are the top three investment themes on your radar for Samvat 2083?
My three preferred themes are:
1. Domestic consumption: A potential improvement in household spending, supported by income growth and lower inflation, could benefit discretionary consumption businesses.
2. Manufacturing and capital expenditure: India’s manufacturing ambitions, infrastructure development and the private capex cycle offer a multi-year opportunity in industrials, capital goods and select engineering companies.
3. Financial services: Credit penetration, financialisation of household savings and the formalisation of the economy provide a structural growth opportunity for select banks and financial institutions.
My broader approach would be to focus on businesses where earnings growth is underappreciated by the market. The biggest opportunities are often found where expectations are low, not where narratives are loud.