According to ET Now reports, Rahul Chadha of Shikhara Investment describes the recent volatility in AI-linked and semiconductor names as a "healthy" correction following excessive positioning and leveraged flows. This correction comes amid a broader global macro setup with a hawkish Fed and huge exuberance in AI winners. Chadha warns that while demand remains strong, valuations are highly sensitive to any change in demand trajectory, particularly as investors await clues from upcoming results about AI capex maintenance and potential ramp-ups. The pullback reflects a "healthy" correction after frothy AI trade conditions, creating potential for capital flows to shift toward more fundamentally positioned markets.
As reported by CNBC TV18, Harendra Kumar of Elara Capital believes global money flowing out of expensive AI stocks could now flow back into India. This potential shift comes as the country's weight on global indices hits new lows and West Asia tensions ease, creating favorable conditions for Indian markets. The latest developments suggest that India's export baskets are showing improvement in terms of the contribution of high-value manufacturing, such as electronics, positioning the country for enhanced trade opportunities. India should prioritise 'production partnerships' over 'market access partnerships', learning from experiences where economic influence is derived less from the number of FTAs signed and more from a country's position within global production networks.
According to ET Now reports, FIIs have been selling in some of these large caps on the index heavy names, whereas FIIs have been adding exposure to some of the new age companies, manufacturing exports, and internet consumer companies. Chadha describes this as a broader portfolio rebalancing driven by changing growth expectations, emphasizing that at the end of the day, it's relative earnings that drive these shifts. This trend aligns with Kumar's assessment that India's FTA utilisation rate hovering around 25% compared to 70-80% in developed economies indicates the country's trade strategy requires strategic repositioning.
As reported by CNBC TV18, Kumar appears less worried about a weak monsoon potentially hurting markets, noting that some sectors gain even as others lose during monsoon periods. However, ET Now reports highlight medium-term concerns about formal sector job creation and urban demand as additional variables to monitor. Kumar backs Bharti Airtel over Vodafone Idea in the telecom sector, citing Bharti Airtel's Africa business and expected tariff hikes that benefit both operators and the government. This strategic positioning reflects his view on the sector's future prospects, particularly as India must try to build overseas production networks in sectors such as critical minerals, electronics, and textiles to enhance economic resilience.
According to ET Now reports, supportive macro factors such as cooling oil prices and central bank actions to strengthen reserves provide additional tailwinds for Indian markets. However, Chadha warns of structural concerns including weather-related risks like El Nino and weak reservoir levels as additional variables to watch. The combination of reduced global AI stock exposure and favorable index weightings creates potential for increased foreign institutional investor flows into Indian markets, while India's export baskets showing improvement in high-value manufacturing positions the country for enhanced trade opportunities.
