Earnings recovery and cheap valuations make India a good bet despite FII caution: Siddharth Vora

According to Siddharth Vora, executive director of PL Asset Management, Indian equity markets appear to be entering a more constructive phase after months of limited movement, supported by better earnings visibility, favorable macro conditions and attractive relative valuations.Speaking to ET Now, Vora said the recent recovery in the markets is not just year-end optimism but reflects a broader confluence of supportive factors. “India is really poised for a good constructive cycle. Growth remains strong in a low inflation environment, while monetary and fiscal policies are supportive. From a quantitative perspective, risk appetite bottomed out around February and has steadily improved since then,” he said.

Earnings revaluation cycle is underway

Vora pointed out that volatility remains low and the fear factor has diminished, indicating healthier market conditions. Importantly, he noted that the earnings reduction cycle appears to be behind us at India Inc., while an earnings improvement cycle is now underway. “The raw dynamics are favorable and India’s relative valuation against other emerging markets, developed markets and even assets like gold and silver is near a cyclical low,” he added.

India looks attractive as global AI and crypto trading settles down

He also highlighted India’s positioning in light of global shifts in investor preferences. “India has not participated in the AI ​​and crypto rally. As that trade unwinds, India becomes a neutral and attractive allocation for global investors looking for stability and growth,” Vora said.

As for foreign institutional investor (FII) flows, Vora warned that buying from foreign investors will remain limited for now. However, he credited strong domestic participation with keeping markets resilient. “It’s a matter of when, not if, foreign investors will return. India’s macro stability, earnings prospects and domestic liquidity make this a compelling long-term story,” he said.

In the short term, Vora acknowledged risks such as unwinding of Japan’s yen carry trade, a weakening rupee and delayed global trade deals. In the longer term, the lack of direct artificial intelligence in India could also weigh on FII interest. “These are risks, but they will likely disappear over time,” he noted.

Tends toward large cap, value-oriented portfolio

From a portfolio strategy perspective, Vora says PL Asset Management currently focuses on largecaps and midcaps, with smallcaps making up less than 15% of the portfolio. “Smallcaps have disappointed on earnings growth and valuations are not particularly cheap. We are more comfortable with largecaps and midcaps where growth visibility and valuation comfort are better,” he said. The company’s portfolio is currently value-oriented, with a cyclical bias towards sectors such as financials, basic materials, metals, energy and commodities. “Our style orientation adapts to market cycles. Currently, value and cyclical stocks offer a better risk-reward ratio,” Vora said.

While near-term volatility cannot be ruled out, Vora believes the structural case for Indian equities remains intact, supported by macro stability, improving earnings momentum and supportive domestic liquidity.