At a time when foreign investors are selling, geopolitical headlines are rattling markets and talk of India has turned cautious, Sandeep Tandon is making a contrarian call. The veteran investor, who has built his reputation on spotting market cycles, believes the gloom has gone far enough to create an opportunity. "I've never seen this level of negativity about India globally," Tandon says.
Why The Pessimism May Be Overdone
Over the past two years, India has gone from the world's favourite trade to a market seen as expensive and overcrowded. Valuations are among the highest of any major market, foreign investors have trimmed exposure, and the AI-led rally in global technology has pulled capital elsewhere. Add geopolitical risk, rising commodity prices and questions over earnings, and the mood is sour.
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Tandon says investors are judging India in isolation. "Don't look at anything in absolute terms. Everything is relative." Measured against where it stood two years ago and against the global backdrop today, he argues, the market's risk-reward has improved significantly. The narrative has deteriorated much faster than the fundamentals.
Capitulation Of Belief
"Capitulation" was the word Tandon kept returning to. He does not mean a crash or panic selling, but a collapse in conviction. Investors who were bullish six months ago now avoid talking up India, fund managers are looking elsewhere, and retail investors wonder whether the easy money has already been made.
Major bottoms, he notes, form when optimism disappears, not when it peaks. "When everybody has given up, that's often the time to rebalance your portfolio," he says.
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The FII Headline Hides A Shift
Every evening, the market fixates on flows from foreign institutional investors (FIIs). Tandon says the headline number misleads. Selling by long-only foreign investors, who hold for the long term, has already begun to moderate, and some global institutions have quietly returned to select Indian stocks. The overall figure still looks weak because of passive selling, which the data does not separate from active allocations. If he is right, the worst of the outflows may be behind us even if the data has yet to show it.
Large-Caps Are Back
His boldest call is on market leadership. The phase in which micro-caps beat small-caps, small-caps beat mid-caps and mid-caps beat large-caps may be ending, and the next leg could belong to large-caps. For years, investors were rewarded for moving down the market-cap curve. Tandon thinks that trade is reversing, and valuations are the reason.
The Mid-Cap Problem
Tandon is not worried about large-caps or small-caps. His concern is mid-caps. They are seen as the sweet spot between growth and safety, which is exactly why they are crowded. Large-cap, mid-cap and small-cap funds, family offices, high net worth individuals and institutions all own them, and crowded trades turn dangerous when everyone tries to exit at once.
"The best people have been sucked into this mid-cap rally," he says. "The exit could become very difficult in some names." He is flagging a liquidity risk, not predicting a collapse.
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Who Is Selling, Who Is Buying
Tandon is also candid about block deals. Promoters, private equity investors and foreign investors have sold in recent months, while mutual funds flush with SIP (systematic investment plan) money have bought. He does not see promoter selling as negative in itself. His worry is that fund managers are taking up every offer simply because liquidity is available, and when money is abundant, discipline tends to become scarce.
The Sectors He Likes
Power and renewables: The AI revolution may be digital, but its biggest beneficiary could be physical infrastructure. Data centres, AI and economic growth all need power.
Pharma: "Pharma could be the next IT," Tandon says. He believes generic exporters could deliver the kind of long-duration wealth creation IT services did.
Infrastructure: After prolonged corrections, several names have fallen sharply out of favour, which makes the space interesting again.
Hotels: A smaller theme, backed by India's consumption and travel story.
The Most Hated Trade
Tandon starts by looking for neglected sectors, where nobody is looking and nobody wants to own stocks. Today, that is FMCG (fast-moving consumer goods). Once the market's most admired names, many FMCG stocks have lagged for years on slowing growth and rich valuations. They now sit in what he calls the "neglected zone", which is historically where big opportunities emerge.
A Diwali Bet On Gold
Tandon was cautious on precious metals for much of this year but has changed his stance. He sees gold moving into an attractive accumulation zone for long-term investors, and his own multi-asset strategies have raised exposure. It is welcome news for the festive season, when gold and Diwali always go together.
The Contrarian Diwali Message
The most uncomfortable markets often throw up the best opportunities. While consensus is fixed on FII selling, rich valuations and global uncertainty, Tandon believes sentiment has collapsed, risk appetite has weakened and scepticism is widespread, which is typically when a new cycle begins.
The question for investors this Diwali is whether India's risks are already priced in. If Tandon is right, the market has spent months worrying about the future just as the future is beginning to improve.
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