Veteran investor and BSE member Ramesh Damani anticipates a massive rotation of global capital into Indian equities as the artificial intelligence boom in the United States loses momentum. The shift is expected to accelerate as the US markets face potential instability surrounding the upcoming November 3 elections.
The AI-driven rally that largely bypassed India over the last few years is winding down due to elevated interest rates, excessive valuations and market exuberance.
Meanwhile, Wall Street is ignoring the “1,000-pound gorilla” of the US midterm elections, Damani, a stock market veteran, told CNBC-TV18 in an interaction on Friday, October 16.
A victory for Donald Trump would likely result in unchecked protectionism, unilateral tariffs and a return to crony capitalism. Conversely, a defeat could trigger an unprecedented constitutional crisis if he refuses to accept the outcome, he added.
“I think what we are seeing is at the leading edge of a great rotation taking place in equity markets,” Damani noted. “At some point, the American market won’t be able to ignore the higher cost of interest rates, higher inflation and the global choke points that are happening because of the midterm elections.”
While a severe breakdown in the US would cause a knee-jerk correction globally, domestic fundamentals and savings will help the Indian market recover swiftly. Drawing a parallel to the October 1987 crash, where Japan recovered first and went on a multi-decade bull run, Damani said that the domestic economy is positioned to find its feet quickly.
As capital rotates out of the US and countries like South Korea and Taiwan see their MSCI weightings drop, India’s sheer scale will attract a larger share of global equity flows.
With domestic AI infrastructure plays becoming crowded and expensive, the focus must shift to localized defense and critical materials. The changing global rules under a potential Trump administration make alternative defense strategies and supply chain localisation, specifically in critical minerals, copper and aluminium, highly promising.
On the upcoming Jio Platforms initial public offering, the scale of reaching 550 million users is astonishing, rivaling the 600 million viewers of the Kumbh Mela, Damani said. Considering Reliance was debarred from the telecom business until 2010 due to a sibling agreement, taking the company from zero to an IPO in just over a decade is an impressive feat of execution, he added.
Damani believes that real value addition for the telecom giant will come from global-scale services rather than basic data connectivity, ensuring the public issue will be well received by the market.
Regarding potential regulatory changes, there is cautious optimism for market-friendly tax tweaks. A modest increase in the Securities Transaction Tax (STT) offset by a decrease in the Long-Term Capital Gains (LTCG) tax would be a welcome move, though concrete steps will only become clear by January, the street veteran noted.
For portfolio strategy, the focus remains strictly on bottoms-up stock picking in the ₹5,000 crore to ₹20,000 crore market capitalization range. Having paused private equity investments, Damani believes the listed space offers the best runway for the next decade as India’s demographic dividend kicks in and the rupee potentially strengthens.
“My best advice to clients is remain invested,” Damani advised. “Don’t try and time the geopolitics of what’s going on. India remains a good place to invest. And suppose the market goes down, we just have to grin and bear it.”
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AI boom has neglected India, US Markets overlooking midterm election risks: Ramesh Damani
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Disclosure: Reliance Industries Ltd, which owns Jio, is the sole beneficiary of Independent Media Trust that controls Network18, the parent company of CNBCTV18.com.
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