Raychaudhuri said India has started seeing an improvement in earnings estimates over the past month, a trend that could help address concerns around premium valuations. Looking ahead, he said sustained earnings recovery across sectors and currency stability would be the key triggers for renewed foreign investor interest.
The comments come at a time when Asian markets have turned volatile amid concerns over artificial intelligence (AI) spending, rising US bond yields and a stronger US dollar. Raychaudhuri said recent weakness in markets such as South Korea and Taiwan has been driven more by portfolio rebalancing than by a loss of investor interest, adding that investors have shifted from heavily owned technology stocks into sectors such as retail, financials and other technology names.
According to Raychaudhuri, three global factors have weighed on emerging markets over the past few weeks. These include uncertainty over AI capital expenditure and monetisation, higher US interest rate expectations, and a stronger US dollar.
He noted that the debate over AI investment is unlikely to end soon, pointing to continued supply shortages in the semiconductor industry.
There is still talk about a massive shortage in chips and memory, he said, referring to recent commentary from Micron Technology, adding that capacity constraints could continue until 2027.
Raychaudhuri said consensus earnings estimates in India have improved over the past month, placing the country alongside Korea and Taiwan among the few Asian markets witnessing upward revisions. He added that the upgrades have been broad-based, covering basic materials, consumer discretionary, consumer services and financials.
Despite the improving earnings outlook, Raychaudhuri said India still faces structural challenges. He identified weak job creation as the biggest concern, warning that AI-driven automation could further reduce employment in the IT services industry and weigh on consumer demand.
“We have to also acknowledge that AI is here to stay,” he said, adding that policymakers should focus on boosting manufacturing investments and creating employment opportunities.
He also said India’s trade agreements with Europe and the United States could help attract fresh investments if they are implemented effectively. Expanding manufacturing capacity and building partnerships in sectors where China currently dominates intellectual property will be important for sustaining long-term economic growth, he added.
For the full interview, watch the accompanying video
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