Kotak’s Nilesh Shah: There is a ‘quit emerging markets’ movement underway

Foreign investors continue to pull money out of emerging markets, and India is no exception. Nilesh Shah, Managing Director at Kotak Mahindra Asset Management, which manages assets worth over ₹4,400 crore, described this trend as a “quit emerging market” movement, comparing India’s situation to that of an exceptional batsman in a struggling cricket team.“The only batsman who played in emerging markets is India,” he said, noting that markets like China, Brazil, Russia, South Africa, Turkey, and South Korea have significantly underperformed developed markets over the past two decades.

Shah believes that foreign institutional investor (FII) outflows from India are likely to continue, not necessarily because of India’s fundamentals, but due to broader concerns about emerging markets as a whole.

FIIs have pulled out nearly $10 billion from India’s stock market since the start of 2025, as global capital shifts back to the US. They have been net sellers in the market nearly every day except January 2 and February 4. In the week ending Feb 7, they net sold stocks worth $894 million.On the domestic front, however, investor confidence remains strong. Shah pointed out that Systematic Investment Plans (SIPs) and mutual fund inflows continue to hold steady, even as the market tests investors’ patience.

A significant portion of household savings still sits in cash, with deposits exceeding ₹35 lakh crore, and Shah argued that educating people about the benefits of shifting these funds into equity markets could sustain the inflows.

Also Read | Ambit taps Japan’s appetite for Indian small caps with new fundShah’s advice to investors is to adhere to the principles of asset allocation and be mindful of some factors.

The high returns seen in the past five years are unlikely to be replicated in the next five years, with large caps likely to fare much better.

Investors must focus on reasonably valued sectors and remember that more money has been lost waiting for a correction than during an actual correction.

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For the full interview, watch the accompanying video

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