- Foreign investors have been reducing exposure to Indian equities for nearly two years
- Lack of new-age companies limits global investors from deploying meaningful capital in India
- India is strong in autos and pharma but lacks listed firms in AI, robotics, and quantum tech
Foreign investors have been reducing exposure to Indian equities for nearly two years, but according to Ajay Srivastava, the debate is focusing on the wrong issue. Speaking to NDTV Profit, the MD of Dimensions Corporate Finance Services argued that concerns around taxation, liquidity or short-term market sentiment miss a more fundamental problem: the lack of enough new-age companies and sectors for global investors to back.
“It's not about taxation, it's not about anything else,” he said. “It's also about where do they come and invest?” According to Srivastava, foreign institutional investors can only deploy meaningful capital into a limited number of large, liquid companies. Beyond that, India lacks sufficient listed businesses in emerging sectors that are attracting global capital flows.
“We need to offer options for FIIs,” he said. “We need to be in the sunrise sectors where people want to put the money.”
Beyond Traditional Sectors
Srivastava acknowledged that India has built strong positions in sectors such as automobiles, electric vehicles, auto ancillaries and pharmaceuticals. “We are very strong in autos. We are very strong in pharma,” he said, adding that several companies in these sectors are largely debt-free and do not require significant external capital.
However, he argued that the next wave of global investment is increasingly gravitating toward areas such as artificial intelligence, robotics, quantum computing and advanced technologies—segments where India has limited listed exposure.
“Those themes are not available in India,” he said. “If you don't have those in your portfolio, you're doing a disservice to yourself.”
FDI Matters More Than FPI
Srivastava also urged investors and policymakers to pay closer attention to foreign direct investment rather than focusing exclusively on portfolio flows. “Let's not focus on FPI, FPI, FPI,” he said. “Net FDI needs to be positive.”
Unlike foreign portfolio investors, who can exit markets quickly, direct investors bring long-term capital and establish businesses that contribute to economic growth, he noted.
For Indian investors, Srivastava's advice was straightforward: diversify. While domestic equity markets remain an important part of portfolios, he believes investors should also gain exposure to global themes that are difficult to access through Indian stocks alone.
Whether it is AI, robotics, quantum computing or defence technologies, many of the world's leading companies in those sectors are listed overseas. “You've got to expose yourself to AI. You've got to expose yourself to robotics. You've got to expose yourself to quantum computing,” he said.
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