 "Samir Arora, founder and fund manager, Helios Capital Management")
With the Sensex approaching its 40th anniversary, one of India’s biggest strengths has been its ability to avoid major policy missteps or government actions that could structurally erode market valuations — unlike China, which has faced such challenges until recently, says Samir Arora, founder and fund manager at Helios Capital Management. In an email interview with Samie Modak, Arora explains why there is no structural reason for global investors to underweight India. Edited excerpts:
India has underperformed several global markets this year. What explains this divergence?
That’s actually old news. Indian markets have begun outperforming in recent months. In the current quarter, the NSE 500 index in US dollar terms is up 5 per cent, while China is down 5.6 per cent, the S&P 500 is up 2 per cent, and the Nasdaq is up 2.5 per cent. One reason for this bounce-back is that India had underperformed earlier in the year.
The initial underperformance was largely driven by foreign portfolio investor (FPI) selling as global investors sought to cover underweights in China and, possibly, South Korea, particularly in artificial intelligence (AI)-linked stocks.
Corporate performance in India was middling due to tight liquidity at the end of 2024, and sluggish information technology (IT) sector results also weighed on sentiment. The announcement of additional Trump tariffs further pressured both equities and the rupee, putting India at a structural disadvantage due to some of the highest tariff levels globally.
FPIs have been structural sellers of Indian equities for some time. Is this trend cyclical or more fundamental?
FPI selling is cyclical. Even this year, after heavy selling in January and February, they became net buyers between March and June. It was only from July that flows turned negative for India, even as FPIs invested in other markets. That shift coincided with lacklustre corporate results and the Trump tariffs in August, which worsened sentiment.
With corporate earnings likely to bottom out and improve — supported by lower income-tax rates, lower interest rates, lower goods and services tax, easier liquidity, and expectations of a US-India deal that could offset tariff impacts — there is
no structural reason for global investors to continue underweighting India.
Despite this year’s underperformance relative to most global markets, India remains among the best-performing markets over five-year, 10-year, and longer horizons.
Global capital has been flowing heavily towards AI-linked themes. How has this affected flows into India?
AI enthusiasm did divert flows from India, not only because we lack major AI plays, but also because many believe the Indian IT sector could be negatively affected by AI. However, macro themes like AI can run out of steam unless continuously reinforced, and it is now clear that investors are questioning both the investment case and valuations for major AI plays in the US and elsewhere.
After nearly 14 months of time correction, have valuations in India become more reasonable?
Broadly, Indian markets are fairly priced. Valuations vary across sectors, giving investors an assorted menu to match their style.
The Sensex turns 40 in 2026 and has delivered over 15 per cent annualised returns since inception. Can such long-term compounding sustain?
Indian markets have largely moved in line with earnings, which grow 13-15 per cent annually in local currency terms. Long-term performance is therefore in line with fundamentals. A key advantage has been India’s avoidance of major policy mistakes or government actions that could structurally damage valuations, unlike China until recently. The market also offers a broad universe of companies across sectors, giving investors tremendous choice.
Since 2017, strong domestic flows have further strengthened resilience and lowered beta. Fiscal discipline, a contained current account deficit, and sectoral reforms have also contributed to market stability.
The domestic mutual fund (MF) industry has grown rapidly since the pandemic. Is Helios late to the party, or is the growth runway still intact?
The runway is long. India has fewer than 50 MF companies, and household penetration remains far below that of most markets. Growth can continue for the next 20-30 years. While Helios MF is new, the team is not — our senior members have worked together for over 18 years.
In an increasingly crowded asset-management market, how will Helios differentiate its offerings?
Sustainable performance backed by a robust investment philosophy is the true differentiator. We have that. Helios has been running funds for 20 years with a clear, consistent track record that anyone can verify.
In just two years, our domestic MF assets under management have reached nearly ₹8,000 crore, supported by strong performance. We are very satisfied with this trajectory.
The long game
- Underperformance fades: India’s back ahead of peers this quarter
- FPI flows cyclical: Selling phase, not a structural exit
- AI hype pulled capital: Fatigue creeping in; flows may rotate back
- Valuations hold steady: Pockets of value, not excess
- 40-year resilience: Policy steadiness + domestic flows built the backbone
