Underweight global investors fear India upside surprise, says Kotak's Pratik Gupta

International investors are increasingly concerned about being caught underweight if India rebounds, said Pratik Gupta, CEO and Co-Head of Kotak Institutional Equities, speaking on the sidelines of the firm’s Chasing Growth 2026 Investor Conference.“Most global investors right now are underweight India,” he said, noting that this worry is shaping conversations at the conference. “The MSCI India weightage was 23% back in about July-August, 2024. It’s now come down to just around 13%,” he added.

Within those portfolios, IT remains the most under-owned sector, reflecting deep caution around the impact of artificial intelligence (AI) on traditional services models.
Gupta said US investors, in particular, are paying close attention to the “AI scare trade”, debating whether the disruption will resemble past technology cycles or mark a more structural shift. Domestic institutional investors had been buying IT during the decline, supported by steady inflows, but AI uncertainty has now made them more guarded as well.Market participants are split between two narratives — whether AI will trigger widespread job losses and earnings pressure or primarily serve as a productivity tool that expands technology spending over time. “We think that is a bit overdone,” he said, referring to extreme job-loss forecasts.

Gupta noted that clarity will take time as new AI tools are being rolled out almost weekly. Even before the AI-driven selloff, demand growth for IT services had only just begun to stabilise, making sentiment fragile and prompting most institutional investors to stay in wait-and-watch mode rather than buy aggressively.

Some value may be emerging in large-cap IT after the correction, but confidence remains low as the debate has moved beyond quarter-to-quarter earnings to long-term business models and terminal value assumptions. Investors are assessing how quickly companies can adapt, retrain and realign their workforces.

He said markets tend to swing toward extremes, and current pessimism assumes outcomes that may not fully materialise. Like cloud adoption, AI implementation across enterprises is expected to take years, not months.A sharper slowdown in India’s IT services industry, however, could have broader economic implications. “There’s unanimous consensus that if there is a sharp slowdown in the IT services sector in India in the short term, you will see a pretty significant impact on the discretionary consumption plays as well,” he said, citing food delivery, automobiles and other consumer-facing sectors as likely to feel the pressure.

Despite near-term caution, longer-term interest in India remains strong. Sovereign wealth funds and global long-only investors are evaluating opportunities in banks, NBFCs, healthcare, telecom and manufacturing. With India’s weight in global indices down from earlier highs, many investors remain underweight and worry about missing a potential upside surprise if sentiment turns quickly.

Momentum currently favours North Asian markets, but Gupta said global investors are actively debating whether to increase allocations now or wait for more earnings clarity.

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