“Number one earnings, number two earnings, number three earnings. That is, unfortunately, the biggest disappointment for India right now,” he said.
Consensus Nifty 50 earnings growth for 2026-27 (FY27) has fallen to around 9.3% from expectations of 15–16% six to nine months ago, Raychaudhuri added.
“It looks like fiscal 2027 would also be a single-digit earnings growth year,” he said. “We have had that in fiscal 2026.”
“They’re [foreign investors] not selling India without a reason,” he said adding, “They’re not finding large frontline stocks where they can make money and where there’s a positive earnings framework supporting the valuations.”
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He contrasted India’s position with North Asian peers. Earnings estimate upgrades are happening across sectors in Korea and Taiwan — not just in technology — as the gains from artificial intelligence (AI) investment percolate into household incomes and broader consumption, he argued.
Beyond earnings, Raychaudhuri flagged India’s balance of payments as an underappreciated risk. Net foreign direct investment (FDI) has been close to zero and possibly negative this year, he said, meaning the current account deficit (CAD) is no longer being offset by stable long-term inflows.
For foreign institutional investors, a weak rupee directly erodes dollar-denominated returns, compounding the drag from weak earnings. “These are the issues that need to be sorted out before we have a degree of enthusiasm on the part of foreign institutions about investing in India,” Raychaudhuri said.
Within India, Raychaudhuri said his model portfolio holds a neutral stance, with its India weight at approximately 14–14.5% — in line with India’s share in the MSCI Asia ex-Japan index. His largest overweights are Korea, Taiwan, and Hong Kong-China.
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He highlighted three sectors from the Indian equities for a one-to-three-year horizon: private sector banks, industrials, and consumer discretionary. He also flagged base metals — particularly steel and zinc — as the only segments currently seeing earnings upgrades at still-reasonable valuations.
Consumer discretionary, he argued, stands to benefit once the present cycle of inflationary pressure eases. Consumer spending accounts for roughly 60% of the Indian economy, he noted, and the space includes diagnostic chains, food delivery platforms, and e-commerce companies.
For industrials, Raychaudhuri pointed to a longer-term catalyst: reconstruction demand from West Asia, where Indian engineering and infrastructure companies have established expertise.
His advice to Indian investors was pointed: “The best strategy is to diversify a significant chunk of their portfolio outside India, particularly into Asian emerging markets.”
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