Indian equities may continue to face pressure in the near term as global investors remain cautious over valuations and elevated oil prices, but the correction is creating opportunities in select sectors, according to Conrad Saldanha, Founder and CIO of Aurveil Capital.
Saldanha said investors are closely watching geopolitical developments, crude oil prices and bond yields before increasing allocations to India. However, he expects stock-specific opportunities to emerge as markets stabilise and believes sectors such as non-banking financial companies (NBFCs), manufacturing exporters and power equipment are positioned for long-term growth.
Saldanha said the recent sell-off in AI-linked stocks should be viewed as a market reset rather than the end of the investment cycle. While rising bond yields and tighter funding conditions are weighing on speculative companies, he expects businesses with stronger balance sheets to continue benefiting from AI-led capital spending over the next few years.
He said higher borrowing costs are exposing weaker business models, particularly among AI infrastructure companies dependent on external funding.
Saldanha also believes the current decline is part of a normal market cycle.
Turning to India, Saldanha said valuations remain the biggest hurdle for overseas investors.
Despite those concerns, Saldanha highlighted financials as one of his preferred sectors. He said Aurveil Capital continues to like NBFCs such as Cholamandalam Investment and Finance and Shriram Finance, citing their ability to deliver earnings growth.
He also remains positive on manufacturing exporters and power equipment companies, naming Craftsman Automation, CG Power and GE Vernova among businesses he would continue to own.
This is an edited transcript of the interview.
Question
Bond yield sell-off. Is it a flight to safety with the AI trade wobbling once again, Conrad?
Answer:
But when we spoke earlier, there’s a confluence of earnings going up and driving these share prices, and you’re also having these rising bond yields. And you’re starting to see spreads, CDS swaps, starting to blow out a little bit. So, the latter tends to prevail if it tends to stick for a longer period of time. And there’s going to be a distinction between companies that have solid balance sheets at the top of the food chain, like Nvidia, for that matter, where the multiples are looking reasonable, versus the other extreme, which is dragging down the entire space—the neo-clouds. I’ve spoken about them before. I think the business models rely on funding. For example, CoreWeave—if your capex looks nice and rosy at $35 billion to $40 billion coming into next year, but you already have a $50 billion debt pile, yields at 15% don’t make any economic sense. So, that’s going to be the challenge that the funding for the neo-clouds, etc., is going to take the shine off the margins. But I don’t think it really detracts significantly from what I believe is good visibility into 2027 and most of 2028. So, it creates an opportunity. It’s not all equal, and the market is right to think there was a fair bit of momentum. The last time we spoke about retail investors in Asia, I said whether it was Korea, where the margins were super high and that flushed out a lot of the retail leverage, potentially you’re seeing that in Taiwan as well, and pockets of it in Japan. But that’s a kind of healthy reset. But I still look at earnings when I look at memory companies now, at the multiples they’re trading at, with bit growth into next year. I still think the capex number looks solid. But it is the jitters around the neo-clouds and the funding, given where rates are right now, that are definitely a big issue. And then people are tracking Anthropic and OpenAI—what’s their IPO pipeline? What do those multiples look like? And that can seems to be getting kicked down the road, which is also a negative blemish on a space that has done fantastically well.
Question
So, you don’t think we are entering a period of—not turmoil—but, you think the rout continues?
Answer:
I think so. Given there were tonne of momentum investors, we’ve been early in this trade for a few years now, and I could see that a lot of momentum investors have seen the share prices go vertical. So, there’s a little bit of a cleansing that happens. It’s not uncommon to see these 30% type corrections. You saw that when we spoke about DeepSeek, call it January of last year. You saw that with the Liberation Day events that came in April of last year. So, you do get a bit of cleansing and some of the weaker hands and leverage getting washed out. But I still think the fundamentals look pretty good as I look out into next year, and I would just be patient about picking your spots with some of these names. I know you’re showing the Kospi, and given the dominance of a couple of the big memory companies, that, along with the leveraged ETF, saw some animal instincts come in. I think this is all a part of that cleanse that will create an opportunity. But you need a strong stomach and a longer time horizon for it.
Question
What about India? Indian markets have underperformed, and now the fear is that we’re in for more pain. How would you view this? Do you think that there are select opportunities that you like? Are there a couple of sectors or themes that you’re spotting here in the Indian markets? Please let us know.
Answer:
It’s kind of a tough spot. It’s not cheap enough yet for a lot of the global investors like myself and others who are looking at India. There’s a good earnings story coming into the rest of this year. But when you’re looking at idiosyncratic opportunities, people are looking at places like Brazil. There’s a bit of a new story there ahead of the elections. Multiples are cheaper. But given where yields are headed, and particularly given the stickiness of oil prices, and as much as we’re trying to temper the rise in oil prices from the US administration, given what’s transpired in the West Asia, I’m not sure that situation subsides anytime soon. And post the midterm elections, it could potentially even get worse. So that’s what keeps people maybe on the back foot before jumping into India. One is valuations. Secondly, it’s oil and that impact, which probably gives people a bit of a pause. On stocks, I do think the financials look good. The NBFCs—we’ve owned Cholamandalam Investment and Finance for a long period of time, Shriram Finance as well. They look pretty good. If you’re still going to grow and deliver normal growth north of 12%, I think those look-like good areas to be exposed to. I still like the manufacturing export side of it. So, whether it’s Craftsman, which we had owned for a long period of time, I do think there are opportunities there. CG Power and GE Vernova are names that stand out. GE Vernova, in particular, is interesting because you’re also seeing it in the US, where a lot of investors are waiting on the sidelines for these companies because the multiples are high. But these are long-cycle businesses. By the time the earnings peak, it could be another decade, even though this AI trade could fade from a sentiment standpoint. So those are businesses trading at the right multiples. They’ve done well. They’re not cheap, but those are stocks I would look to own.
For the full interview, watch the accompanying video
Global investors remain cautious on India; Conrad Saldanha prefers NBFCs, GE Vernova and exporters
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