India likely past peak outflows, AI gap its advantage: Lighthouse Canton
Lighthouse Canton says foreign outflows from India may be ending, sees AI absence and capex driven sectors as advantages, but outlook hinges on oil staying near $90 a barrel.
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Foreign outflows from India may have largely run their course despite its status as one of the world's most oil-vulnerable economies, a top executive at Lighthouse Canton said, adding that the country's lack of AI exposure could prove an advantage of absence.
Domestic benchmarks Nifty 50 and Sensex are down about 11% and 13% so far in 2026, respectively, after fears of AI-led disruption tanked the heavyweight IT index 27% and the crude price spike after the Iran war worsened the macroeconomic outlook.
However, when sector concentration reaches such levels, investors tend to fatally underprice the possibility that a risk could emerge from outside the core business model, said Abhay Laijawala, chief investment officer, India, at Lighthouse Canton, a global wealth and asset management firm with more than $5 billion in assets under management.
South Korea and Taiwan have both logged some foreign outflows in June, suggesting investors have begun trimming exposure on concerns around crowded positioning and index concentration.
India, by contrast, has little exposure to chip fabrication, but offers a deep, listed universe tied to the next phase of AI spending, such as power, data centres, electrical equipment, cooling systems, engineering and capital goods, Laijawala told Reuters on Friday (June 12).
"We have plenty of picks and shovels," he said, adding that the absence of the AI trade would be India's advantage.
Laijawala's sentiment echoed the view from asset manager BlackRock, which said earlier this week that India's equity market had been over-punished for lacking a direct AI play.
However, Lighthouse Canton's constructive near-term view on Indian markets is conditional on crude remaining at around $90 a barrel.
Oil near $90-$94 a barrel may be manageable, but $120-$130 a barrel would threaten macro stability and earnings, while El Niño was another near-term overhang, Laijawala said. "Although less monsoon-sensitive sectors could offer shelter."
If geopolitical tensions ease and oil prices retreat, few markets stand to benefit as much as India, he said, adding that such a move could trigger a wave of foreign buying into Indian equities.
Lighthouse Canton favours capital goods, engineering, power, electrical equipment, defence, healthcare, pharma and large banks.
Banks stand to gain as a revival in capex shifts credit demand from consumers to corporates, Laijawala said, and added that the best opportunities lie beyond the Nifty, where earnings momentum remains stronger despite more attractive benchmark valuations.
Domestic benchmarks Nifty 50 and Sensex are down about 11% and 13% so far in 2026, respectively, after fears of AI-led disruption tanked the heavyweight IT index 27% and the crude price spike after the Iran war worsened the macroeconomic outlook.
Foreign investors pulled out funds worth a record $30 billion from equities so far this year, and instead piled into South Korea and Taiwan, dominated by semiconductor and memory names. The two markets overtook the Indian market in terms of market capitalisation in the past month.
However, when sector concentration reaches such levels, investors tend to fatally underprice the possibility that a risk could emerge from outside the core business model, said Abhay Laijawala, chief investment officer, India, at Lighthouse Canton, a global wealth and asset management firm with more than $5 billion in assets under management.
South Korea and Taiwan have both logged some foreign outflows in June, suggesting investors have begun trimming exposure on concerns around crowded positioning and index concentration.
India, by contrast, has little exposure to chip fabrication, but offers a deep, listed universe tied to the next phase of AI spending, such as power, data centres, electrical equipment, cooling systems, engineering and capital goods, Laijawala told Reuters on Friday (June 12).
"We have plenty of picks and shovels," he said, adding that the absence of the AI trade would be India's advantage.
Laijawala's sentiment echoed the view from asset manager BlackRock, which said earlier this week that India's equity market had been over-punished for lacking a direct AI play.
However, Lighthouse Canton's constructive near-term view on Indian markets is conditional on crude remaining at around $90 a barrel.
Oil near $90-$94 a barrel may be manageable, but $120-$130 a barrel would threaten macro stability and earnings, while El Niño was another near-term overhang, Laijawala said. "Although less monsoon-sensitive sectors could offer shelter."
If geopolitical tensions ease and oil prices retreat, few markets stand to benefit as much as India, he said, adding that such a move could trigger a wave of foreign buying into Indian equities.
Lighthouse Canton favours capital goods, engineering, power, electrical equipment, defence, healthcare, pharma and large banks.
Banks stand to gain as a revival in capex shifts credit demand from consumers to corporates, Laijawala said, and added that the best opportunities lie beyond the Nifty, where earnings momentum remains stronger despite more attractive benchmark valuations.
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