'Sell US AI': S Naren Flags Overheated Bubble, Bets On India As 'Ultimate Contrarian Play' After Multi-Year Lag

Indian equities are steadily morphing into an attractive contrarian opportunity as irrational exuberance concentrates heavily in US technology rather than domestic markets, according to S. Naren, Executive Director and Chief Investment Officer at ICICI Prudential AMC.

Speaking at the NDTV Profit Ignite 2026 Diwali special event, the veteran fund manager warned that the artificial intelligence trade in the United States has reached unsustainable extremes, creating ripe conditions for a major market reversal.

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"The exuberance is not in India; it is in the US," Naren said. "The biggest contrarian opportunity today is for investors sitting in exuberant markets. Today in India, you can be contrarian."

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The US AI Trade: 'A Sell'

Naren was unsparing in his critique of global valuations driven by the generative AI boom, directly advising investors to exit the trade.

"Anything connected to US AI is a sell," Naren stated, pointing out that several AI-linked corporations are currently commanding market capitalisations exceeding the gross domestic product of entire nations. "Everything can't be worth a trillion dollars. At some point in time, things will reverse-it is only a question of when."

Invoking Warren Buffett's famous adage, Naren reminded market participants that "only when the tide turns do you know who is swimming naked." He cautioned retail and institutional players alike to manage risk prudently before sentiment pivots: "You should be rational, not insolvent."

Contrarian Value Emerging in India

While broad market levels in India have seen sustained consolidation after years of underperformance relative to Wall Street's mega-cap tech rally, Naren pointed out that healthy corrections across key domestic heavyweights have opened attractive entry points.

Specific pockets that have corrected and now present value include:

• Financial Services & Private Banks
• Life and General Insurance
• Fast-Moving Consumer Goods (FMCG)
• Information Technology (IT)

Defining his core contrarian philosophy, Naren noted that high-conviction ideas typically emerge from forgotten segments. "The stocks that qualify for a contrarian framework are the ones that haven't given returns for the last 10 years," he said, adding a fundamental reality of value investing: "You never get good news and a bad share price together."

Asset Allocation Over Macro Forecasting

Addressing global uncertainty and escalating macroeconomic headlines, Naren cautioned investors against attempting to time portfolios based on geopolitical developments. "We often overestimate our ability to predict geopolitical events," he remarked.

Instead, the seasoned fund manager urged strict adherence to systematic asset allocation as the single best strategy to protect capital and build sustainable long-term wealth.

"The right way to invest is asset allocation. If there is a bubble, you trim; if there is a crisis, you increase your allocation," Naren said, recalling past cycles where early warnings went unheeded. "Even in 2024, markets were not cheap, but at that time nobody listened. I had called silver a small-cap stock, but people did not believe it."

With valuations in domestic pockets realigning with historical averages, Naren reiterated that capital discipline-rotating out of crowded global momentum and systematically deploying into domestic value-remains the most viable play for the cycle ahead.

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