A moderation in valuations and the cooling of the global AI-driven rally have positioned India as a more attractive investment destination, according to Mitesh Shah, CEO of Equirus Family Office. Shah highlights the potential of domestic sectors such as manufacturing, defense, alternate energy, and consumer discretionary as long-term wealth creators for investors.
The recent moderation in valuations, coupled with the global cooling of the AI rally, has reignited investor interest in India. Mitesh Shah notes that previously, high valuations and the absence of direct AI beneficiaries in the Indian index were concerns for investors. However, with these factors now adjusted, India is regaining its appeal.
For NRI investors, domestic sectors like manufacturing, defense, alternate energy, and consumer discretionary are emerging as attractive options over the next 5-10 years. Shah suggests that these sectors hold significant potential for long-term wealth creation.
“Now that the AI rally has cooled off globally and the valuations in India have become significantly better, we see investor interest coming back to India.”
Mitesh Shah, CEO, Equirus Family Office
Despite the recent removal of capital gains on Indian bonds, the increasing yields of US treasuries have somewhat diminished the relative attractiveness of Indian bonds. Nevertheless, they remain a good diversification option due to positive real yields.
Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) are becoming more favorable compared to holding physical real estate, offering superior liquidity and manageability. Shah recommends a diversified asset allocation for NRIs, with 50% in equities, 20% in debt, 20% in REITs and alternatives, and 10% in commodities including precious metals.
Shah emphasizes the importance of alternatives such as private credit, PMS, and AIFs in providing low-correlation returns, especially when equity markets are moderated. These alternatives have delivered good risk-adjusted returns, making them valuable components of an NRI's portfolio.
Background
India's investment landscape has been evolving with the moderation of valuations and the cooling of the global AI-driven rally. These changes have made India a more attractive destination for investors, particularly in domestic sectors that promise long-term growth.
As India continues to adjust its valuations and the global AI rally cools, investors should keep an eye on the evolving opportunities in domestic sectors and alternative investments. The strategic use of GIFT City and private credit could further enhance India's attractiveness as an investment destination.
