India back on FII radar as oil prices fall and AI trade unwinds: Kotak’s Nilesh Shah

Foreign investors are increasingly turning positive on India as lower crude oil prices and the unwinding of the global artificial intelligence (AI) trade improve the country’s investment case, according to Nilesh Shah, Managing Director of Kotak Mahindra Asset Management Company (AMC), which managed funds worth $4.77 billion as of September 30, 2026.

He expects overseas allocations to India to move towards a neutral position after a prolonged period of underweight positioning.

Shah said recent foreign inflows are supported by improving macro conditions rather than short-term market moves. He added that India’s earnings growth, combined with more reasonable valuations after two years of underperformance, is attracting global investors.

“I found meetings possible with all the investors we wanted at the highest level,” Shah said after returning from meetings with investors across the US and Canada. He added that “many of them cut the check as we spoke, and many of them were looking to cut the check.”

According to Shah, lower crude oil prices and a reversal in the AI-driven global investment theme have become the catalysts overseas investors were waiting for.

“The catalyst they wanted was lower oil prices and reversal of AI trade. Both are happening, and hence we are seeing their allocation moving towards a neutral trajectory,” he said.

Shah noted that India remains firmly on the radar of family offices, sovereign wealth funds, pension funds and endowment funds. While investors with local research teams are looking across largecap, midcap and smallcap stocks, those without on-ground presence are largely focusing on largecap companies.

Shah said the recent recovery in terms of market valuations follows a prolonged period of consolidation rather than excessive optimism.

“We are climbing back because in the last two years valuations have become 30% cheaper as corporate India continued to deliver earnings growth,” he said. Comparing India’s recovery with the AI-led rally, he described it as ‘the story of tortoise versus hare’.

Commenting on taxation, Shah acknowledged that foreign investors, particularly endowment funds, continue to seek greater consistency in India’s tax framework. He said sovereign funds are generally unaffected because of their tax-exempt status, while family offices and pension funds continue to monitor long-term capital gains taxation.

He suggested that India should adopt a uniform tax treatment across investment products.

“If it is an interest income or a dividend income or a capital gain, it should be taxed at the same rate, irrespective of which structure it is coming from,” Shah said, adding that a level playing field would improve the investment environment.

On the broader market outlook, Shah maintained that investors should stay disciplined despite periods of volatility.

“Market is a battlefield. You have to maintain discipline and you have to remain on the battlefield to make money,” he said.

For the full interview, watch the accompanying video

India back on global investors’ radar as lower oil prices drive FPI interest: Nilesh Shah

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