Should You Still Invest In India

TITLE: Should you still invest in India? CHANNEL: Capitalmind DATE: 2026-06-24 ---TRANSCRIPT--- The rupee has gone to 97. It went to 97. But then the rupee weakening means our imports get more expensive. Our uh crude oil which is where we’re dependent a lot on adds pressure to the rupee again because we have to keep importing crude.

It sounds as that you should take all your money out of India, put it in because Taiwan because they make the chips, Korea because they also make chips and memory. Maybe China because they seem to have access to earths and the US where all the innovation is happening. Apparently these feelings inspire me rather than depress me. They’re taking the money out in hordes and they have considerably uh changed their view on India because uh India does not have any AI. It’s interesting that the median profit growth of 5500 is like 17%. That’s quite high. That’s uh ridiculous. So it makes sense to invest into Indian markets during a period of pessimism understanding that all of these stuff I talked about will take you another year. But over a 4 year period or 5 year period you’re probably going to see the benefits. Are we already doomed or do the pessimists have a point? Hi everyone and welcome to a new episode of the Capital Mind podcast. My name is Shandra and I’m one of the co-founders here at Capital Mind. In today’s episode we’re going to take a look at the concept of peak pessimism. Both Deepak and I feel that the narratives of India versus those of the rest of the world, particularly around the AI case have diverged dramatically. India is the place where nothing can go right and AI is the place where nothing can go wrong. With this, we thought we’d bring in Deepak to discuss is this time really different? Is India doomed? What will prospects be going forward? Should you move some of your money abroad and invest through LRS or other means in global securities? And if India is going to do well, what should you invest in? So do listen in for a somewhat contrarian and different take and if you’re right then do remember that he called this if wrong then don’t let him forget it with that let’s get started deep the narrative around India has been very negative for I think a very long time now and I think in today’s episode we wanted to discover have we reached peak pessimism and are things actually finally turning around or is it like is the worst it’s got so far now on that I thought maybe we can start by actually fleshing out the bare case so can you almost steelman or whatever or or flesh out what is the the most like clear version of the negative scenario that you can lay out for us why is everyone so bearish on India right now in your view so sh I think the uh you know the the feeling or the narrative is bearish and I I I don’t disagree with the uh data points that are being put out now let’s put the bare case right here first bare case is the rupee has gone to 97 it went to 97 7 uh because uh you know of a bunch of factors but then the rupee weakening means our imports get more expensive our uh crude oil which is where we’re dependent a lot on um you know adds pressure to the rupee again because we have to keep importing crude crude prices are going up because of the hormones war India does not have domestic crude resources of meaningful sorts uh India’s importing gold like crazy lived to 72 billion of gold last year therefore um India that doesn’t produce any gold. Therefore, we have to bring in gold uh from uh outside. That’s adding to pressure. Um uh third one is that FBI’s foreign portfolio investors are taking their money out. They’re taking their money out in hordes. They have taken out I think more than 250,000 crores in the last one and a half years or so. They have uh taken out more money than they’ve invested in perhaps the two years or 3 years before that. and they have considerably uh changed their view on India because uh if India does not have an any AI in fact whatever happen in AI is hurting our IT sector which is our biggest export uh and you know it may take away a lot of IT jobs which could hurt our economy it could replace a lot of workers uh so this is the bare case it’s like oh yeah AI comes I will lose my jobs uh there’s an LPG shortage that’s happening because India does not have enough LPG or that’s what the narrative ative ways and it keeps flowing downward saying okay foreigners prefer investing in other countries not in India. India has adverse taxation for foreigners compared to everybody else. Uh India has uh issues domestically pollution infrastructure etc. India also has a relatively limited government space to spend. We do too much subsidies. We do too little actual you know capex level investments. So therefore um a lot of our money our taxes goes towards paying for freebies rather than anything else. These are again macro you know bare cases and all that stuff. And then there is of course the fact that even FDI which was uh foreign VCs and investors investing into Indian startups are now seeing those startups list and taking the money out. So it feels like there is a lot of underconfidence in India. Inflation will go up. You will hurt. if you will basically why then invest in India at all when you have all these headwinds in front of you and then you know therefore money is going out markets are not going up our uh rupee is going down our FBI are exiting and so on. Yeah, I mean the way it sounds is that you should take all your money out of India uh put it in I guess Taiwan because they make the chips, Korea because they also make chips and memory. Uh maybe China because they seem to have access to letters and the US where all the innovation is happening apparently. You’ve unfortunately made too strong a bare case. This is very compelling and I don’t think you’ve said anything wrong at any point. I mean you have actually laid out what seemed like facts. So what am I missing or what are we missing? Why are we recording this episode? Are we all doomed or do the pessimists have a point? So you know sh the my problem I think perhaps I speak from a little bit of uh um you know too much gray hair is that if I have seen these feelings before these feelings inspire me rather than depress me because every other time in the past and I I say this as a generic I’m I’m saying okay you could say this time is different but let’s look at all the times in the past and I’ve been in the markets uh or I’ve at least tracked the markets for these particular times. I know it’s happened even earlier but take 2002 perhaps or 2009 early 2009 2013 a little bit of 2016 um 2020 2020 when the when the COVID crisis happened 2022 when Ukraine happened as well these are all mini issues at which India looked horrible. I’ll give you an example in 2002. 2002 there was 911 that had happened the year earlier. There were there was the Arthur Anderson and uh uh Enron scams and a bunch of the massive IT bust had happened in the US which apparently supposedly affected India. Uh but the end of 2002 it looked absolutely miserable for India. And you know uh interestingly I think Bharti Etel had gone IPO at just about that point into that bare market and you know where were we? There was no meaningful telecom at that point and and so on and then the markets went up 75% the next year because as it turns out in the end of 2002 the actual underlying data was not as bad as the narrative. It looked like oh India would get finished because again same it bust what will companies outsource to India at that time the IT companies were growing 30 to 40% per year and uh of course the dollar had uh again you know was in a stable area it had gone up at that time and India’s inflation was was relatively under control so uh the narrative was negative the markets were weak markets worldwide were weak but uh India’s fundamentals were not bad at all our IT industry was fledgling. It was early early stages. I’m talking about a few billion a year versus the nearly 200 billion it does now. Uh so in comparison we were u you know we were very very small and yet that that was the the the sectors that were supposed to drive the market which perhaps that time was early banks and all that stuff. They all started to recover and you could see that in the data but the narrative remained very negative till end 2003. It was like we were going up during a market uh that was actually very um uh the the news cycle was very bearish towards so like they didn’t believe the market they were like this is just a matter of time before you before it dead cat bounce. dead cats in 2009 you know we had this global economic crisis and but even there wasn’t the it was an American crisis right I mean why why was India impacted so I mean India was impacted a little bit downstream because we were very dependent on foreign flows at that time foreign flows when if fi exited and they exited about 80,000 crores at that time which in comparison with us 240,000 crores is a fairly large amount and that just ruined the market because they were the majority of investors in the market domestic investment was very So in comparison if you saw mutual funds were very small in India that time they weren’t there was no SIP say mutual funds at all as a as a thought process. So everything got wrecked and a large amount of India’s domestic market was speculation in the futures and options market even more than what we see today and we complain about today in comparison with the size that time uh India was a much larger speculative player domestic India. So you saw a lot of people getting hurt and going bankrupt during that time and therefore when the recovery started to happen after March of 2009. I remember the feeling because I had just moved to Delhi at that time and I was like uh this is not going to last but this is a fake recovery. So even you felt it I felt it. I was and this is this is when you know it was really my uh maybe a second or third real crisis. There was a mid crisis in 2004 when um uh the government the left came into power. the market crashed like crazy. Remember that and then in 3 months it had recovered back because you know uh they said the left won’t determine any policy. So the market kind of recovered in 2006 there was a 30% fall after a large IPO uh reliance reliance petroleum I think. Uh there was a very big IPO and then the market crashed 30%. But in 3 months by it was in April and by June the market was down 30%. But by October it was back at new all-time highs. So I had seen a few of these mini crisis but these mini crisises were you know at some point existential saying oh man is everything going to go down flames and then it comes back up relatively fast. So 2008 was more sustained. It was about 6 or 8 months at that time somebody told me deep these narratives uh will change very fast because news travels faster. So I didn’t know understand what he meant but I think we’ve seen a lot of those crisis after that 2013 the you know uh 6 years of QE or 5 years of QE that uh America has done has flooded the US market and the world market with dollars and currency people have money India has a lot of money incoming from foreign investors again even at this time Indian domestic investments are like nothing in comparison with foreign investors they were I think 22% of ownership of uh the Indian market by this time uh 50% of Indian India as promoters 22% by FIS and um u the remaining by all of our retail investors plus corporates plus banks and all that put this today or this was back then this was 2013 13 right so that at that time when there was a talk of a taper tantrum that a taper a taper meaning that no I will not flood the market as much as I used to by and reduce the amount I that I flood the market with this is what the US was saying and then the emerging markets took a beating. I remember this it was actually quite horrifying because I remember our inflation was very high. The rupee weakened even worse perhaps than it did right now. It was quite alarming. It was quite alarming because rupee went from 55 or 57 to 68 to that’s about a nearly 20% fall in a matter of a few months. India then uh changed the interest rates to from o overnight was about 7 or 8% they made it 12% overnight the 10-year bond went to 8 to 9%. liquid funds lost money uh which usually they don’t do right so you you saw this period of craziness at that time and it was like what’s happening I mean the rupees crashing and then um Subaru had to had terms came to an end rajan came in he created the FCNR uh you know thing and basically what he did was increase interest rates and also increase interest rates from a repo perspect uh from a uh from a different standpoint uh uh the instead of turning overnight rates to 12% he made a slightly different change in the interest rate structure and he also created this FCNR pool and at that time it worked because US interest rates were close to 0%. India’s interest rates were as I was telling you 12% overnight and all that stuff. So the gap was wide enough that if you provided a dollar hedge from the RBI at a certainly at a at a defined rate for 3 years then Indian banks could offer foreign currency hedged uh do uh exposure to deposits at say 8% or 7 and 1/2 or 8% uh effective rates. Well, it for them I think for the dollar rate it was effectively 6 and a half or 6%. But getting 6 and a half in almost quasi guaranteed dollar terms when you got 0.25% in the US I can see why that worked and why it won’t work now. Yeah. So at that time of course the numbers were smaller. I mean we talking about it brought in maybe 20 billion or 30 billion and that was enough. That was enough. It’s just that India’s economy is much bigger now. Right. So now now the pro the but that’s so 2013 how long did that last? That was about between June and November. So almost half a year unexplainably market started to go up in December and things were as bad. I according to me it was like oh the dollar still heavy and I mean it was it was getting better. It had come from 68 to maybe 63 and I was like okay this also sounds too high. uh you know it was it was a miserable uh stretch for a lot of people and then I was looking at the markets and the markets started to go up and I was con now by this time I’ve seen a few and then I’m like looking at this and saying peak pessimism is not a good idea and I at that time I was just starting to think about building capital mind right so I could actually say that oh well you know what this is quite interesting and uh there is perhaps something that we can do I actually started Ed building out the portfolio uh concept, investment concept in the midcaps or thought processes around them and we could see a lot of the ground data was actually uh starting to emerge in a better way. The point here was it was peak pessimism at that point and in the time of peak pessimism I could see markets going up uh which and so this time you didn’t disbelieve it. I didn’t disbelieve it. I was like okay this is interesting because the markets are going up when they’re climbing a wall of worry if that may if you may that’s you know the so there was some kind of pessimism overload uh even in the news even in the narratives all the way till 2014 when the market hit a new all-time high and then it’s kind of uh kept going from there 2020 I think the world was in a crisis right we weren’t unique in that sense we weren’t unique in that sense but then the you know when the world was in a crisis they said India did worse than everybody else there was this article by Yeah, famous commentator. Famous commentator. Why I’m losing hope on India? India. Why I’m bullish? I I no longer have any hope for India. This was November 2020. November 2020, India had cases but not meaningful amounts of uh deaths in that sense. And the bigger crisis came in 2021 for us. The delta wave. The delta wave. But um through the delta wave the markets actually went up and when we didn’t have as much markets were going down right so the bad news was on the ground but the the the the economic data was showing otherwise and the core data was showing otherwise the stock markets were going up. So interestingly when you got this peak pessimism case was usually when the best so there are certain commentators that if they start getting headlines I I look at it from a perspective of the negative of the negative for cover right it’s like oh this is yeah correct so it’s like if everybody says India is bad that’s when my trigger thing saying okay we’re getting somewhere here and people I don’t blame the commentators you know there are the same commentators who were there in 2002 and 2009 early 2009 200 2013 who would come on the forefront and be interviewed on TV channels and all that stuff saying we want your views because otherwise their views were useless when the markets were going up and doing very well they would continue to be bearish and then you’d be like these people are a waste to listen to because I can’t gain 100% and lose 30% from that 100%. and then this person keeps telling me that my this country is you know so I would say uh it’s a sign it’s a it’s a trigger sign that says the narrative is worsening so now it’s time to check the data it’s happened in 2020 it’s happened in 2022 in 2022 India was the opposite we were doing well economically as well when the world was reeling under the Ukraine war’s influence now I remember crude at that time went the same way it went to $130 a barrel Um uh and yet we’re not there yet. Actually, we went to 100 and we we’ve come back right now. We’re not there yet. We when we saw all of this happening and now where are we? We we’re again in a pessimism saying all of this stuff. I’ll interject over here that you know I really felt this acutely because as you know I’ve been very focused on foreign and global investing myself personally for for a long time but in August 2024 I had held a like a sort of a a small token position of well not that token it’s reasonably sized position of NASDAQ 100 ETF through the motil product for the longest time at that point I think it was in maybe August where there was some briefly some yen carry trade fears and everything had fallen quite dramatically for a month and then it sort of recovered I remember always being just ashamed of how badly that small position was doing compared to everyone else in India and literally out of I would say guilt/shame I I just quietly exited saying man this has been a terrible four five year experiment I really need to let this go that really was the bot about that so yeah peak pessimism in the US at that time right the global exposure global exposure at that time so interestingly uh it’s at the opposite end of that spectrum right now it says that it’s NASDAQ or nothing and we are the nothing and we are the nothing when you can buy anything else but you don’t buy India. So in that sense there is this peak feeling that is happening but I want to go one step further and I would say listen at that at each of those times the data was actually looking positive you know the stock markets were looking started to go up and uh um you know what what’s the what’s the equivalent now? Yeah. So I think let me bring this to the next phase of this. I get it. But why do you feel we’re at the peak or the worst moment right now? Because all the other signals you’re seeing, are you able to see some of them now? And we will hold you to this. So this will either make you famous or infamous depending on where the next few months go. Yeah, it’s all of this is at some point speculation that sense, right? But if I look at the trajectory of Trude, I’m like, okay, where are we? We went to 120 or something. We’re today, this is May 29th, um, 2026. It’s at $90 a little bit less than $90 in in the market today. The rupee has come back to some 95 odd levels from the 97 levels that it had reached. U crude oil is primarily centered around supply. So there’s a lot of supply that has been blocked because of the hormones crisis Iran, Israel and US war. And that crisis looks like people don’t want to deal with it anymore. Most importantly last few days if you see the US bond yields which had gone uh 30-year bond yield has gone to 5.2%. Uh and one year was 4.6 at some point right this is crazy for the US because every.5% increase in that 10year yield is a $200 billion extra expenditure for the US sounds absurd but luckily the US can just print money so none of this matters anyway. So yeah, they don’t currently they don’t want to because there’s also inflation. They can print money when there’s no inflation. But I think the Fed is also like dude if there’s inflation I’m not printing. So if are you saying not everything is perfect in the US right now? Is that what you’re trying to say? We can talk about that separately. But there are issues that where I think macroeconomically they’ve had issues for a long time and again you know all these issues I talk about about India. All the peak pessimism concepts are not new to India. We’ve had issues like this in the past. We’ve had a lot of these issues just that they’re coming together in some kind of a nicely stringed unified way which one comp complicates the other and complicates the other drains it kind of trains it kind of situation but because it is a linked thing uh the important thing is look at the data okay the crude oil reversal has happened the rupee reversal is happening in in it’s happening in a very slow way but what’s happening over there is crude itself is is one part right so what do we do with crude. We don’t want another crisis. We’ve seen this. Uh both the government and the private sector are like we need to change our dependence because I can’t have shortage. Um then you know so what what are they doing? The the uh there’s some discovery of crude that they’re talking about. They’re talking about building more uh exploration. India does have a lot of crude oil uh that has to be explored. Now it does cost money to explore this. At $60 it may not make a lot of sense. So at some point the government has to say listen I will pay for some part of this. So you don’t feel the damage if crude goes back to 60 but I want to buy that $60 oil from Indians rather than from the Middle East and from other places. So that’s going to happen. At the same time private sector is like listen we got to expand beyond this. So our energy requirements wherever they’re linked to crude we want to dlink maybe go to coal which India has maybe go to uh EV or electric batteries and storage which I think India is working very strongly on uh and that battery infrastructure with PLI2 and all that stuff will come back. So take a period of 3 years from now our dependence on external crude will probably come down not go up at least as a percentage as a percentage. Remember in 2008 crude went to $140 in 2008. India had to increase our interest rates by 1 percentage point at one point because we thought inflation will be so high. We were hugely dependent on crude in the sense that it was a much larger portion of our GDP than it is today and there therefore we suffered for a while. Uh but today that crude oil differential is not as bad. Even then they were administered prices. Now also the prices were controlled from for petrol and diesel but they’ve increased the prices of petrol and diesel to some extent and that’s going to cause some kind of inflation in the uh going ahead but the some of the crude oil pressures were about whether the government is to take a big hit. They have take a little bit of a lesser hit now that the prices of petrol have gone up but remember they’ve gone up for the first time in 5 years which means if you increase the prices by 10% but you increase it over a 5 year period after 5 years that means actually 2% per year which is more reasonable for me to understand and take but since it’s a 5% at one point or 10% at one point I just feel more pain right now this pain doesn’t extend to a 3ear forward phenomenon where most likely crude will come back the situation at hormones, like I said, with the US interest rates has uh caused the US to back off a little bit and has caused Israel and Iran to kind of come to an understanding that this war has to find an end. And I think if it finds an end, a lot of the supply shortages, a lot of the damage to prices, the prices that were going up too much will come down and will will get addressed. This changes the narrative on crude immediately. But that’s just crude. That was just one of like five factors, right? So, let’s say gold. Now, gold, there’s already been an appeal by the prime minister to say don’t buy gold. I don’t think that’s going to happen. But it didn’t seem to work like unlike some of his past, this one didn’t land really. Yeah, it doesn’t it’s not easy to tell Indians not to buy gold, but it’s actually possible for people to monetize part of their gold holdings. I mean, I could buy a lot of gold because I feel richer or I want to use it, right? But if I’m the user of gold, there will be parts of gold that I don’t use quite as much. Now a lot of people do physically take their gold, exchange it and get new ornaments made. Um, typically they lose 20 to 30% in that exercise. So there is a there is a problem with gold that India desires to use it. But India has 30,000 tons of gold. We import 800 tons uh of gold every year. Now 800 tons is a lot of gold to import because 800 tons adds up to about I don’t know I think it’s about a 72 billion or what some some number like that a ton is about 1,600 crores 1 ton of gold so 800 tons of gold will be 14 lakh crores that’s a lot of gold uh that’s a lot of gold to pay for imports but then there are two things here or three actually uh let’s look at the numbers uh India’s 800 imports 800 00 tons of gold a year but it has 30,000 tons this is more than I think the next five countries put together or something some crazy amount of that right so there is 30,000 go tons of gold internally there is a potential way to get India to recycle two or 3% of its gold in the coming years internally but more importantly even uh digital gold and ETFs they also import gold from outside and store it in their wa they are not allowed to lend it out for whatever reason Now I would say this part can be fixed. So oil and gold I I I think those were fairly persuasive in a sense almost desperate times will call for desperate measures and this is something we can fix. But now let’s talk about Indian industry. It feels that we’re sort of in the industries of the past and do you see that do you see that in maybe our profit growth or I mean maybe now moving this also a little bit towards markets as well. Um when you look at our companies, do you feel we’re we’re basically behind the times and all the innovation is happening worldwide and we’re stuck with industries of the past or do you see our companies continuing to do well in some ways at least and some of those results percolating into the stock market? Super. Okay. This is now this is where okay forget the crude and gold I can’t have we can’t have any major report on that and we a control on that as industry is as industry are we doing well? The answer to some part of it is there’s some earnings growth visibility. December quarter was already showing those signs. The March quarter is showing amazing signs. We’re looking at the Nifty 500 results so far. You could have fooled me because I don’t feel it, but I mean it’s it doesn’t feel like it, but it’s interesting that the median profit growth on Nifty 500 is like 17%. That’s quite high actually. That’s uh ridiculous. I mean some part of it may be a base effect and all that stuff but it is very high compared to what it was in the past. Uh the commentary that’s come in is demand is there supply there are some issues here and there but they will get resolved. Um almost every industrial seems to be doing well or really well they’re seeing an increase in orders and so on. Uh the government itself has after 2022 changed its mind about Indian um um uh dependence on foreign u uh imports of goods normal goods. Now when it says mobiles and semiconductors and uh uh electric vehicles, batteries and cells and technology and so on, India has now started the effort of saying listen we need to reduce this. We need to substitute imports by manufacturing domestically. So I want to promote the manufacturer of stuff domestically. What have we done this in in we’ve done this in cars and we’ve become reasonably good now. Some of our cars are actually quite good domestically manufactured cars. We are one of the few countries in the world to actually have a decent car industry. Most people have just given up to China. They’ve given up to China, Korea, uh Europe and US. Even the US has given up for the most part except in the US you find those cars a lot more than anywhere else. But the same thing with India. India. Indian cars are very popular in India and we promoted that industry and it’s taken us a long time but it’s kind of come through. We have to think like that going forward even for all the other industries. We need rare earths. India has a lot of rare earths. We have we don’t have the mining and refining technology. We need to get it or we need to build it. We need to build the research. We need to do the work. We need to refine the stuff ourselves. Uh like the vidanta chief said give it to people who want to do it. They will find a way to do it. uh we don’t make semiconductors. We’ve started to make semiconductors and it’s already come from the low end to the mid- end. That means we’re working with companies like ASML to say give us the machines, we’ll do it. They might give us lower-end machines, but at least if we were to manufacture lower-end semiconductors, we could replace a lot of imports that come into the cars that semiconductors are manufactured in China. We could there is a lot of work that’s happening around this front but the core data shows positive growth not negative in fact and but is it just profits which could be like perhaps as you said base effect or something like that what do you see in terms of I don’t know capex or in terms of credit growth how are those going yeah so capex and credit are linked right so industry in India didn’t do capex at all since between 2014 and 2025 this why because uh actually started off because of the Indian bankruptcy bankruptcy code. Now the typical idea in India was large industrial families would take loans from banks and then default on them then go to the bank and say let’s do settlement DRT etc etc. The bank would take the hit and give another loan to the company to pay back half of its earlier loan write off the other half and then move on. This is very standard by the way. This is also how a lot of farmer loans operate. When farmers realize there’s a farm loan waiver coming, everybody stops paying the loans so that they can settle and the government will pay their loans instead and then they get more loans and move on. Okay. But you feel differently when the farmers do it and when some large problem right so because we just feel that rich industries shouldn’t do it. Poor farmers who are actually some of them are quite rich do it. It’s fine. But I’m not going to get political about this. I’m just saying that this was the phenomenon done earlier. Um however in with the bankruptcy act what started to happen and it happened uh perhaps with um I think uh uh Tatast steel first acquiring um one of those bushan bush steel yeah I think and bushan there was a comes from a again a rich industrial family where they didn’t think that this would actually go through but the bankruptcy said we are yes you can repay only half of your that’s fine but you lose the company we going to sell it to somebody And it actually happened. And it actually happened. So So but this should have been bullish for capex. So it was bearish because suddenly all companies which had borrowed and they expected to get a little bit of these write-offs suddenly said dude dude just pay back the loan. These banks will come and take over our companies. So it was like a reset. It was a reset. So they said we won’t do capex. And a lot of this capex was goldplated. So in the sense of if I wanted 100 crores I’ll borrow 200. I’ll only spend 100. I’ll siphon off the remaining 100 and um you know the I I’ll make the bank write it off. So the real capex I’ll pay the remaining this thing and banks themselves were very aware that this was happening. They would do stunts to kind of uh um um you know they all had some understanding some of there was there was an understanding all of this stuff went away banks were loath to lend to capex in the first place corporates that were good were saying I’m not doing any more capex I’m done I want to be zero debt I want to be this I want to be even the good I mean I’m saying there there are some bad corporates some good corporates the bad corporates were like listen we don’t want to do this anymore I don’t want to lose the company for the sake of a but what about corporates who who aren’t going to default on this anyway. Yeah. They were like listen if you go to the banks they are going to lump us in with the bad guys anyway. So it was just a air of mistress air of mistress or in a new environment and and people were like this IBC thing can be hurtful because anyone can put a claim any time and then they could take your company through bankruptcy. It took a lot of time for the law to get established saying listen frivolous but capex by itself did not go up across the industry. one what is one comp company’s capex was another company’s drop in capex and so on it is now suddenly that capex seems to have risen quite dramatically it may be linked to the other changes we’re talking about where the government is pushing people to do PLI data centers are appearing in India and so on all of these things have changed the nature of capex completely India’s got a nuclear um breakthrough that breakthrough is going to require us to build at least maybe five or six more nuclear plants, nuclear size things in the next few years. That has increased capex in one area. There is semiconductors. There is uh differentiation in cars. A lot of this for domestic usage. I’m not even saying for export. Just replace domestic usage and you should be in better shape. All of this is happening at the same time. And how does it reflect in data? You look at bank credit growth to industry. It was at uh 15% in 2013. It grew 15% yearonear as measured in 2013. It went to 0% even negative after that. That means it kept going down in terms of growth and then now it has finally come back to 16% as of March 2026. So capex growth is increasing and therefore credit growth is increasing because people are funding this capex through credit u uh bank credit and because you can see it in industrials and I think that is one very important sign even the personal uh uh loan credit that means you and me taking loans for housing or for for personal loans or for businesses or for you know a loan against securities and all of that stuff even that is growing now finally after 2 years after uh RBI clamped down on the sector quite you know strongly in 2024 and then for for a year we saw credit growth even in the personal area for personal loans go to zero and then because there haven’t been that many defaults RB has eased up on this and then now we’re back up to 16% there as well so if you consider credit as one early stage indicator of India uh showing signs of recovery then credit is coming back. So both capex and credit you you have enough positive narratives to indicate that things are in a sense turning around and and it’s already happened. We just don’t believe it yet. Now maybe I thought I’d bring this unless there’s anything else that I’ve been forgetting. I thought I’d try and bring this to investors because so far you know we’ve been talking macro. There’s oil, there’s gold, there’s credit growth and so on. But most of us, especially the people listening to this podcast, while this is all very interesting and useful, the fact is we look at stocks or we look at mutual funds or maybe we look at some debt funds or something like that. And over there we’ve been in a couple of years of I think at best flat to low singledigit returns and at worst if you’ve been in the wrong strategy 10ative 20 who knows how bad it could have gone depending on where you were stuck. Um so on that do you even see some beginnings of green shoots in the stock market like like remember all those other episodes where like it has started to go up but everyone is like oh don’t take this seriously. Yes. Yeah I know you know it’s interesting. Let me take two areas where I think India has uh gotten a beating. One is the FBI/ FDI uh issues and one is um um the AI kind of a issue. Well AI they said okay let’s start with AI. I don’t want to dwell too much on it. There are too many people writing so many things. I I can’t I don’t think I could stand to listen to another take on your no you know every morning you come and today I hear that the AI tools that people are using are suddenly refusing to do work training uh they they’ve been trained to say I’m sorry I you are not supposed to write this email. I’m like dude I wanted if I wanted people to uh you know I I have enough you know but I’m starting to mute this on all my but is not the AI but AI’s problem with AI was a India didn’t have much air and b India was going to lose jobs to AI I think both of these assumptions are just wrong every technology takes away some jobs creates 10x more uh whether it was the uh uh you know the typewriter industry that would have been destroyed by computers. Yes, sure you sold some lesser typewriters but you sold you got people who could type continue to type on a different framework you know something different skill when you had an STD booth for mobile phones those got people got wiped out the people who owned STD boots but now they sell some other stuff while people use mobile phones for everything you can’t make you can’t pay someone to make a phone call anymore but now I I really need you to bring this back to market because I’m getting what happens over here is that if you if you think of AI as not having a negative on it and there is a positivity to maybe more work coming around the fear on this IT companies destroying themselves because of AI is no longer valid or isn’t valid in the long term that has one thing second FMCG companies got hit because they said AI is going to reduce jobs so well you know what that impact is not there so I’m saying downstream if you look at the AI effect second order effects it’s not as bad as it Intel 2 as as we’ve seen but at some point there will be the next gen of players that will sit on AI many of whom may be in India just because India has the enterprise to build those companies a lot of companies in India are doing routing for AI and a bunch of security features and all that stuff but there’s also a lot of nextgend companies that are being built here that may take place in the next five or six years so I don’t think we will lose out on the AI game uh from the listed market these guys may still take some time but you will find that there will be usage based parameters on top now the markets itself if they’ve taken these negatives and the FBI have taken these negatives and suddenly find that the narrative that India is zero on AI is maybe two on AI out of 10 that itself brings in some investment going forward there’s a peculiar concept in FDI as well FDI is essentially what foreign investors have invested in unlisted companies So, Swiggy, Zomato, etc. when they were fledgling companies got investments from abroad. Those companies have listed. Now, these are VCs. The VC structure says you don’t get to behave like a fund that can repeat its investments. That means if you sell something, you have to give the money back to the investor. You make your 20 investments, whatever makes money, take the money out, give it back to the investor. He gives you new money, you create a new fund, and you do on go on. Well, it generally takes long enough anyway. So, thank God. Yeah, that’s that’s that’s the way they have structured. But it’s not like us as a mutual fund. If I sell one stock, I can use the money and buy another stock and that’s perfectly fine. I don’t have to return the money to the investor itself, right? So when they these companies list, so whether it is a a small company or a big company, when they list in the market, these VCs have to go to the market and say whatever money whatever I can take out, let me take out, I have to give it back to my investors. my investors then have a timed phase lag between them investing into back that money into India. Maybe there’s a negative sentiment right now and so on. There’s also the fact that interest rates are high in the US which means that people who investing in fixed income can make a slightly higher return. So to that extent I think uh there is some pension funds and all that who said take out our riskiest investments and invest them back into fixed income because I don’t need the extremely high returns from uh emerging markets. I can use them in US government bonds instead. So they’ve changed the mix somewhat. But I think all of this is going to reverse and um this will take longer from a interest rate perspective. But I think overall you’ll see that as time goes by these FBI reversals in terms of bringing back that investment and reinvesting into India will happen over a course of time especially after if there is a um I won’t say AI bubble burst but I will just say slowdown of growth in the AI infrastructure that is currently being done in abroad. So I think some of that money will get reallocated. Markets then benefit from liquidity that says the foreign investors don’t go out as much. Rupee benefits in some way because again of these reversals. The market is already showing signs of earnings and then we’re seeing an increase in uh um uh you know domestic investment, domestic industrialization and so on. So there’s a downstream impact. Now don’t think of any of this as this is May, this will happen in June. I think you should think of 2026 versus 2030. How do we go from here to there? I think that is the thing that picture that we’re missing. It’s peak. It was peak optimism two years ago. There was nothing but India. You had India plus China plus one Goldilocks economy. Yeah. China plus two also in some cases. Goldilocks economy. The words were you know flowing out at that time and like you said in October 2024 the US was underperforming India by a large extent. So to to that extent it sounded like India was the best thing to be and nowhere else was the best thing to be or a good thing to be. Now the tables have turned. Korea’s P of4 has gone to P of8 and they’ve doubled and Taiwan has gone up and you know Japan has gone up. Suddenly you find that oh there’s everything but India. I think both these views are wrong. The truth is always somewhere in between. So it makes sense to invest into Indian markets during a period of pessimism understanding that all of these stuff I talked about will take you another year but over a 4 year period or 5 year period you’re probably going to see the benefits of whatever is we’re doing to fix what’s happening right now. Okay like as Sharma says every time he comes on a stage India manages to disappoint both the optimist and the pessimists at all times. So that’s completely understood and taken. I have two areas I’d like to state and maybe I’ll I’ll move on to like advice for uh for people as they’re looking to invest. The first one Deepak is you know a lot of people have from India have in this time been talking about the importance of foreign investments. They’ve set up like either they have something in Gift City or they’re saying no I don’t have anything but you should still do this and I can maybe give you advice or or you can I can give you some ideas of what to buy. Um it’s done well so far. I’ll go as far as to say that you know even last night I I had to wake up and this this morning I was like is this is this a typo but apparently Dell is up 40% after hours after already being up some 100% in the last year. So the momentum there hasn’t abated there yet if I may put it that way. So how do you feel about people who are like look this was a wakeup call I can’t have all my money in India I should have money abroad and these these noble souls are helping me with my journey abroad whoever they might be on Twitter or things let me go and listen to them and hopefully invest some money abroad. How is that going to go? No, this is actually uh I think also recommend we’ve been talking about this since what 2016 2017 where we said so many of our uh investments uh or our investors themselves should have some kind of a foreign exposure. We’ve had the NASDAQ 100 ETF even the PMS for a while we’ve actually done um you know talked to our customers and said you know 5 or 10% of your investment should be non-India. One of the reasons why it should be non-India is just for the diversification and the fact that you might need dollars when let’s say your kids grow up and maybe they go to a college abroad and and so on. However, it’s overdoing it to a point where oh I should take all my money out to out of India. I should take a significant chunk of my money out of India. I should then if I take 10% out of India then 90% is India. If India hurts my 90% of me hurts but I can then I if I go around telling everybody my 10% is is doing great that part is also in congress by saying that’s the only thing that I have right it’s like when you only look at the one profitable stock otherwise bad portfolio yes it doesn’t really but I think you should have a diversified portfolio for this precise point that at some point you’ll have a mix there are some issues here that you know there is an LRS limit And you know those limits may change. There is a taxation on every LRS thing that you do that has this but you invest out when the dollar is at 95 and your investment abroad is exactly the same and the rupee comes back to say 85 or something 85. because rupee is so there is a there is a measure called the reer I don’t believe in it uh because I think it undervalues the rupee but because the complexity in this is a merchandise trade weighted average of all our uh all all trade between uh different currencies countries and our relative inflation with those countries now when you do merchandise trade we have heavy weighted on China We have some US and but China is our biggest. So our relative inflation with China determines where our thing is and China is a controlled you know exchange rate economy. However uh India with has a significantly higher services trade with the US. So if you use that India India’s relative inflation with the US is much lower. In fact India’s inflation is in fact lower than the US right now. So technically we should be appreciating if you looked at just inflation but I’m just saying that this year undervalues the rye. The year was at 105 106 which to me was not a problem but today the reer itself is at 90 and that also according to me undervalues the rye. So so we’re that itself says that we are 10% below what it should be. So it should it could go from 96 to 87 just if you get that right we’re going to this segment again. No but then it takes sometimes sometimes it takes a year year. These are macro you know paint dry watching and all that stuff but I feel um if that happens you lose 10% in rupee terms you’ll be the same in dollar terms but if you’ll be 10% down in rupee terms and that is a 10% loss that that’s one whammy which is right now you’re having the opposite if you had any dollars abroad you’re seeing it the rupee value go partly because of the well just the second thing is what if there is a return of Indian that peak pessimism thing happens where India goes up relatively more uh because it’s at a relatively lower number and we are in the early stages of where we are but wherever if the recovery is fast uh in the next 1 year or 2 years you might find that the Indian change in um uh stock prices could be higher than what is happening abroad. The second one is uh let’s say this the B part of this thing would be what if the US markets or the world markets don’t return as much there are lots of reasons why and macroeconomically you could argue either ways but there are lots of things like US bond yields being very high has a deficit all of these countries have infinite money printing machine might one day face constraints might be finite yes all right Deepak here’s my closing question let’s say someone has made it through to the end of this podcast they’ve listened to it at some level. This is also very prescriptive things we can do. Now let’s look at again your own portfolio. If you have there are a lot of people I know customers in our PMS and maybe I guess to some extent customers of our mutual fund as well who have cash on the sidelines who got it over the last years have saved it and haven’t deployed it yet. Is now a good time for them to deploy? Uh should they do equities? Should they do Indian debt? Uh in equities should do small cap, midcap, large cap. How would you ask them to think about this to the extent when they’re making their further decisions of you know I think this has further to go uh or if someone right now is thinking maybe I should do some LRS how should they think about it? Yeah, I think I mean the LRS thing is a question that I think everybody will have at some point. But I say think about it as a systematic investment rather than a lump sum that you you can do this over a period of time but that 10 20% of portfolio is where I would say do it because there are complexities investing abroad tax differentials all sorts of things that happen but on the at the same time I think now when you have a lot of cash your portfolio is let’s say 50 rupees investment 50 rupees cash or say 75 rupees investment 25 rupees cash that 75 rupees let’s say all of it was in equity or rather Half of it was in equity. You wanted yourself to have a 50/50 exposure. You now have 37 odd in equity, 37 odd in debt, and 25 in cash. That’s a lot of debt. That’s a lot of debt. Yes. So, I mean, assuming that 50/50 is where it is. But if you just want to bring back yourself to 50%, you would actually have to invest half of this money again into equity, half of this money again into debt. But let’s say you decided to invest a certain amount. I don’t know it’s maybe 10 lakh rupees that you’ve saved. You want to invest it in equity to get your equity debt allocation to some level. That 10 lakh should not go in at one point because we know all of these problems that we’ve just mentioned are not going away tomorrow. This is not the bottom. This is peak pessimism but it may not be bottom. The peak pessimism phase can last three or four months. You can narratives can get worse. These particular commentators can be on the front page of newspapers. uh there there is a lot more that can happen and we’ve seen that optimism can also go to crazy extremes. We saw in the US that at some point the market actually nearly doubled before it fell in the 99 99 situation because people kept saying that market will go down and the market doubled before it fell. So the unfortunate part about uh not being able to predict those market you can’t time it to fiction. Yes. So I would say therefore I don’t have a correct answer on now, tomorrow, later. I just say keep at it. Uh things could get worse but I see the next four years as very big positives. So regardless of when you invest now, I think four years later returns should be commensurate to the greater economic growth that we will see. So you’ll be fine over the period of time. The reason I’m saying that invest in a phased manner is because I said peak pessimism when market prices were going up. Market prices are not yet going up, but they’re not going down. They’re not going down. But I I’ll give you that, but they’re starting. They’re showing signs. They’re saying, “Okay, maybe.” Oh, no. No. Maybe. Oh, no. No. So, that’s what they’re doing right now. So, we’re testing a point when the market hits a new all-time high. And it will seem at that time that come on, how can our markets be hitting an all-time high when I just collapse the next week. This is another big trigger. This is my last trigger. At which point I say that at that point I’m confident that things will go back uh in the long term. And I feel that you know even at that time it’s like a phased investment. But by the way we did hit close to an all-time high in January this year. And then we got the Ukra the Iran war in February. back down and back down if we hit it again and I think that’s when we I’ll get more confidence that this is actually peak pessimism at a time when market prices are going up. So since that is ahead of us that’s why I say invest in phases. I think uh that when that does come then you’ll get yourself use it as a trigger point to say I’m on the right track at least I’ve invested on in the in the in the in the right I would say that is the point that you want to play the type of fund large mid small is any pattern from previous crisis or something special this time because of the level of I don’t know capex or something we’ve had so I think capex means typically that the largest companies will do better but it also means that uh the absolute number is That doesn’t mean that the smaller companies will grow at a smaller percentage rate. So it’s like if a 10 cr company doubles it becomes 20 crores. If a 100 cr company grows at 30%. It’s at 130 cr. So the 30 cr differential is much larger than the 10 crore differential of the small company. But you’ve got 100% return in one versus a 30% return in the other. Right? So the percentage gain could be greater if you invest in a more diversified portfolio that contains both large, mid and small. If you don’t know, do flexic or do all of them. Yeah, we have flex. So I mean in that sense we do have uh offerings make this your fund manager problem not fund manager problem and then uh if you don’t even know whether to invest in equity, debt or commodities then go to a multiasset or or spread your you know wings that way. I would say the actual in instrument to invest in should be as broadly diversified as possible. If in the equity universe then the flexi cap is the most diversified. If it’s across the market, a multiasset makes more sense. But that is your typical I don’t want to have to think before I invest thing. Now I wish Indian mutual funds could invest abroad much more easily. Then we could give international diversification but the limits right now. So those thing investments you may have to do personally at separate on a separate basis but understand there that you have this three or four things that can provide that whammy that takes away from your returns in the next 3 4 years but that’s fine because you’ve gone in there for diversification. All right fair all right Deepuk. So I’m curious to see how this episode ages whether we really did catch the the worst of peak pessimism or if the worst is ahead of us. So we’re going to find out soon enough and we’ll hold you to it. Right. Thank you. Well, that’s our show. I think like me, you’re probably curious to see whether we’ve timed this one right. Is this truly the moment of peak pessimism and things are going to turn around or is the worst still yet to come. But either way, if you’re looking at your Indian investments more seriously and are figuring whether you’d like to add more to it, then I think there’s two ways we can help you. If you have more than 50 lakhs and are looking to invest, we have our PMS capitalmindwealth.com uh where we can invest your money in Indian and eventually global stocks and securities. and we have our mutual fund. So, if you’d like to get into our flexiap fund, our multi-asset fund and maybe outsource the decision-m and even the taxes to someone else, then you can go to capitalmindmf.com uh and take advantage of a much smaller ticket size to participate. So, with that, see you next time and happy investing. Mutual fund investments are subject to market risk. Read all scheme related documents carefully.