India Offers Long-Term Compounding Amid Cyclical Valuation Discount, Says Kotak AMC's Nilesh Shah

Following a North America roadshow, Kotak Mahindra AMC Managing Director Nilesh Shah stated that global investors continue to view India as a structural bull market. He noted that current valuations are nearly 30 percent cheaper compared to levels seen two years ago, though return expectations should be moderated to high-single-digit or low-double-digit levels.

India continues to draw strong attention from global institutional investors, though the investment rationale has evolved from chasing outsized returns to focusing on long-term compounding, according to Nilesh Shah, Managing Director of Kotak Mahindra AMC.

Speaking after a North America roadshow that included meetings with sovereign wealth funds, pension funds, endowments, and family offices, Shah reported sustained interest in the Indian market. He noted that institutions are actively evaluating allocations or have already committed capital to the country.

Shah characterized the current market environment as a "structural bull market available at a cyclical valuation discount." He explained that investors are currently able to access India's growth at valuations nearly 30 percent lower than the peak exuberance observed two years ago.

However, Shah cautioned investors against maintaining unrealistic return expectations. While he dismissed the likelihood of 30 percent annual returns, he positioned India as one of the top global investment opportunities for those seeking high-single-digit to low-double-digit compounding over a decade.

The attractiveness of the market is supported by resilient earnings growth, steady domestic participation, and the potential return of foreign portfolio flows as global investors rotate away from crowded artificial intelligence trades into emerging markets. Shah noted that the current market rally is largely being driven by underweight investors restoring benchmark allocations rather than a broad 'overweight India' trade.

Sector-wise, Shah highlighted banking and financial services, premium consumption, and modern manufacturing as key areas of opportunity. He stated that banks are entering a strong phase supported by healthy credit growth, low non-performing assets (NPAs), and solid balance sheets. He also pointed to the upcoming 8th Pay Commission as a potential catalyst for discretionary spending across automobiles, travel, consumer durables, and hospitality, alongside manufacturing firms expanding their footprint in global supply chains.

Looking at future market triggers, Shah identified the implementation of the 8th Pay Commission, a turnaround in foreign capital inflows, strong corporate earnings, and tax-policy reforms as critical factors. He advocated for greater consistency in taxation, arguing that the coexistence of the Securities Transaction Tax (STT) and Long-Term Capital Gains (LTCG) tax creates structural distortions.

For the financial year 2027, Shah projected earnings growth of 12 to 15 percent for large-caps, 20 to 25 percent for mid-caps, and 15 to 20 percent for small-caps. While he noted that India can maintain a baseline economic growth rate of 5 to 7 percent, achieving sustained double-digit growth will require continued structural reforms in land, labor, ease of doing business, and project execution.

"Nilesh Shah's perspective provides a grounded assessment of how global institutional capital views the Indian market today. For entrepreneurs and business builders, shifting from short-term exuberance to long-term compounding means focusing on sustainable unit economics, resilient balance sheets, and strong corporate governance. As valuation cycles normalize, businesses that demonstrate consistent earnings and disciplined execution will naturally attract the foreign and domestic capital currently looking for stable, long-term growth opportunities in India." — Dr. Shishir Gupta, Founder & CEO, StartupLanes