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The theme today is navigating market risk in 2026. We are focussing on investment strategy in the context of volatility and shifting market conditions. And as you know, every day there is something that shifts.

Last night, it was the United Arab Emirates pulling out of the Organisation of Petroleum Exporting Countries, or OPEC. And that means there is a significant shift, likely, in the oil markets. Now, apart from oil, there are many other markets that have been shifting and moving, and creating and formulating an investment strategy, whether you're a small or large investor, mostly large in this room, I think is something that we should be thinking deeply about, not just for today, but for future.

So our guests today, let me introduce both of them. Pratik Agarwal is the managing director and CEO of Motilal Oswal Asset Management Company. Motilal Oswal manages close to 180,000 crores now, and has more than 10 million investors as part of their family.

Ashish Soumaya used to work with Motilal Oswal earlier, so you may see some similarities in their thinking, or you'll be forgiven for thinking so. He runs White Oak Capital Asset Management. White Oak is two parts. There is White Oak, the international arm, which manages roughly about $10 billion in all. And about half is managed in India by Ashish as the CEO of White Oak Capital Asset Management. So thank you both for joining me.

And Pratik, it's over to you to start off on navigating market risk in 2026.

Pratik Agarwal

Thank you, good morning. When we think of risk, it can mean different things to different people. To us managers, it is risk of underperformance. Index is doing X. If you do X minus, we don't look good. But for investors, it may mean something completely different. For investors, mostly it will mean positive return versus negative return, and higher return or lower return versus other asset classes, because every investor would do asset allocation. So let us take two kind of risks separately. On risk one, which is risk of underperformance, we have been saying so don't catch for very narrow periods, but this is a period of change, huge change.

Right? And if you think of the construct of the market, on the first risk, risk of underperformance hence is very low. The index comprises of all of the legacy businesses.

They had a glorious past. Now you just whitewash the name of the companies and look at how they have done over last five quarters. And think if you would invest into them, mostly you would not. It's getting, you look at the old, losing vigour. And newer spaces are happening. Now there is no manager who puts all the money in the index.

Everybody goes out of the index. And hence my take is this is a period where a very high percentage of managers would end up generating alpha. Okay?

The sharper the better. Now in this, a lot of what is happening today and causing a lot of concern accelerates the move. So for example, a lot of people are clued on to AI and what it may do to various parts of the market, notably software.

So software has not been doing much earnings growth. 15% of the index maybe won't perform. The move gets accelerated, right?

Oil, higher prices. So thought on oil is a tad different short-term and long-term, but short-term higher prices. The way out is to electrify.

Electrify using domestic fuels. Domestic fuel could be coal, don't like it, but coal, solar, wind. And maybe if you need to store base, which is the direction in which policy is moving, it gets accelerated. Maybe today the newspaper says induction for kitchens. EVs we just spoke of. So that trend gets accelerated. And once again, what happens? You know, index faces headwinds. Stuff outside of the index does better. Now here just one more point, that Indian macro is not looking too good today. It is stressed, okay? When oil moves up and stays where it is, it is stressful.

We bleed six to $7 billion extra a month. And when we do that, FPIs also pull out and increase the hurt. Now, FPIs will sell what they own.

It's very difficult in this country to short, you know, borrow and short. So let's say FPIs will sell what they own. What they own is banks and IT.

So to the extent somebody is out of the index and with the newer spaces, I think they will generate alpha. So we think it is time for alpha. So the first kind of risk, I think works in favour of managers.

It is a favourable time. Now the second risk, which is risk of underperformance versus other asset classes. Now here I think the mind is more split, especially if we talk shorter term.

You know, shorter term, if this thing continues, if oil stays over 100, actually if it's up to below 60 in a short period of time, but what people are actually doing is thinking that this won't last for too long, 15 days, 20 days, one month, one and a half month. And then if oil drops sharply, and it would because versus earlier when we were younger and we thought oil will run out in 20 years, today the politics is completely different. Now it is, there will be oil left in the ground and we won't be able to sell.

And you saw one, you know, all the wars today are you don't produce, let me produce and sell. And UAE actually walked out of OPEC. Now they don't want to be controlled, they want to sell what they have.

Russian oil coming in, Iranian oil coming in, Venezuelan coming in, US coming in. So there is more oil than was there before the event. Post event as and when it normalises, you see a price lower than that. So wait for that time. And that could be two, three months away. How would India look?

And today anybody who is investing is investing with that thought in mind. So yes, we know it is stress, stress, stress, but the up move can be very sharp. And you are positioning for that.

Now versus other asset classes, we think for last one plus years, we have had zero returns on the index. You know, April has been better, but up till March, minus 3%. One very simple thought.

Market follows earnings growth. So last year was an 8% earnings growth on the index. This year will be a double digit.

So index has 18% to make up. It does in this period or the next period, we don't know. And on top of it, you have, like I made a case for the first part, this is time for alpha.

So most managers should be ending up better. So, you know, give time, not much, you know, beyond three months kind of a time, and you would find equities returning more than other asset classes also. Thanks, Ashish.

Ashish Soumaya

Yeah, I'll just build further on what Prateek mentioned in terms of managing risk and volatility. See, from an investor's perspective, I think what is most important to manage risk and volatility is two things. How does a manager look at risk?

So how fund managers look at risk? Obviously, he's covered. I'm talking only for investors.

So from an investor's perspective, when it comes to managing your own portfolio, I think two things to keep in mind. One is that all successful investors, they need to be probabilistic, right? And second is probabilistic, not deterministic.

And second is never swing for the fences, never go for the extremes. I think these two are very, very important. What is happening is that when we are in September 2024, for example, then everybody thinks that our Amrit is going to come tomorrow, correct?

And just 18 months down the line, you guys don't even have AI. You're even importing oil. You're importing gold.

Your fiscal deficit is going to go for a, current account deficit is going to go for a toss. Your currency is going to go to 105. You're witnessing, your FDI is negative, your FPI is negative.

What do you have? You have nothing, right? So this is extreme thinking. If you say Amrit Kaal, it doesn't come tomorrow morning, okay? And just because there is an AI rally outside India, and for one year there is FI selling, it doesn't mean we are going to the dogs. So I think extreme thinking is what is really causing all this turmoil.

And because of extreme thinking, people are not even able to practise asset allocation. So look at it this way, that you become too deterministic, right? I mean, in 2024, you think all your money should go to equity and why equity, it should go to small cap, okay?

When you hit 2026, you think all your money should go to gold, correct? So that type of extreme thinking, and I know there are many qualified investors here, there are family offices. They may not necessarily think like that, but on the margins, what is happening is that every incremental rupee that comes in or every rupee that is being deployed is being looked at very, very binary outcomes, very deterministic. Now to see today, for example, everybody is asking that, how do I invest in emerging markets? Last year, everybody was asking, how do I invest in US? In 2023, we launched a fund which invests heavily in gold and silver.

We have struggled to raise money. And today we are going to struggle to, in three months, we'll struggle to raise money in equity, I think, right? So I think that when people are very deterministic, then they cannot practise asset allocation however much you actually tell them.

Only people who are open-minded, people who are probabilistic, people who can think that, okay, the point at which we are, what is the probability ABC will happen? What is the probability XYZ will happen? And how should I distribute my assets?

You can do that exercise only if you are open-minded or open to possibilities. But if you think that, ab to hamara kuch nahi ho sakta hai, then you cannot practise asset allocation because then you are associating a zero probability with our stock market turning around. And I actually agree with Prateek's view because if you see oil, for example, what he said, we are in 2026 and all doomsday theories will come.

Let me remind you in 2008, I'm not naming names. In 2008, there was an analyst. When oil was $145, we both were actually working together doing roadshows.

In 2008, Lehman Crisis, we both were in the same organisation. We were actually on the road, okay? In 2008, there was an analyst who wrote 140, when oil was 145, he wrote, he wrote peak oil theory.

And you know what he said in 2008? Obviously, you would have covered all this. He said that we are beyond the point of maximum availability of oil. We are beyond that point. From here on, availability of oil is only going to decline. By 2050, oil will be over.

And forget 2026. In 2008, he said oil will cross $200. So in 2008, oil was 145.

In as recently as 2022, oil was 129. 2010, 11, 12, for longest periods, oil was 100. But what does the history say?

The history says exactly what he said. Every time oil price goes up, it is eventually followed by a crash. Because when oil goes up, there is demand destruction, there is alternate fuel, and the supply suddenly comes from, literally from nowhere, the supply starts to come.

So I think that all investors, they need to be open-minded, they need to be probabilistic, and they should never, you know, you listen to somebody from the stock market, they will either tell you market is going to really go up, or they'll tell you market is going to go down. You listen to a commodity expert, they'll tell you gold is going to go to 10,000. You listen to somebody who is investing in technology, they'll say South Korea is the place to be in.

It's not going to help. I think people need to practise probabilistic thinking, and then some asset allocation.

Okay, thank you for that. So you spent a lot of time on oil, so I'll quiz both of you on that. So one of the, I think, issues or challenges many investors face, or anyone who's trying to understand what's going on, is to first figure out which indicator to look at.

So if you look at, let's say, Dow Jones or NASDAQ, there is no correlation with the real world, pretty much. Oil seems to represent a closer correlation with what's going on. Indian markets seem to be somewhere in between.

So even as we try and measure risk, or perceived risk of the near future, what is the thing that, or what is the index or number that we should be looking at more closely, in your mind?

Ashish Soumaya

Personally, if you ask me, I have the luxury of not being a portfolio manager myself. And I meet large number of people. Like, you know, in any given week, I do public speaking four times in a week.

And the number of people I meet every week is in hundreds. So I look at how people are responding, reacting, and behaving. It might sound textbook-ish, it might sound cliched, but it has always helped me.

What questions people ask me. Where are people investing their money? What are they most happy to hear about?

What is it that they're totally dissing? I look for those kinds of things. And it's not just fuzzy stuff, even data.

You know, I'll give you a very cliched thing. Like Mr. Buffett said, be greedy when others are fearful. And be fearful when others are greedy.

It behoves you to know what others are doing. And make sure you're not part of the others. The only, and our industry is damn transparent.

Because you just go to amphiindia.com, we report to you every month what others are doing. So in September 2024, we hit a crescendo. I mean, there was 30,000 crore of net flow.

13,000 of that went into sector funds and thematic funds. And the flow into gold was less than 1,000, maybe 1,000, 2,000 crore. And people didn't know silver funds existed.

That's 24. You go a couple of months back, the flow into sector funds, thematic funds was less than 1,000 crores. Gold flow was more than equity.

And silver was some nine to 10,000 crore. So I observe flows. I observe how people react and respond and what they want to do.

And right now, we are hitting some serious contra indicators. If I just go by what people are talking to me.

Okay, I'm gonna come back to that. Prateek, so you know, I have a slightly broader question. There is a disruption and you talked about it.

Is this a structural disruption in the whole energy mix which could lead to new kinds of, let's say, bets or opportunities? Or is it a transitional disruption?

Pratik Agarwal

From what we will end up feeling, it's not as if we will not use petrol and diesel over the next three, four years. It will be there for 20 years. So it will feel transitional.

But if you look at, you know, what kind of vehicles people are buying incrementally. So from a four and a half to seven and a half, depending on a passenger car vehicle or a two wheeler, which is the current penetration of EVs, I would suspect it will rise very rapidly. As the charging infrastructure, et cetera, comes in.

If we look at cooking, you know, 30% of LNG goes into, CNG goes into hotels. Now, my thought is this 30% number has come because somebody has looked at it. It is a low hanging fruit.

Why can't it be electrified? Maybe for chapatis you have gas, but for the rest of it, it can be induction. So electrification will gain a lot of traction.

Now, frankly, because markets are holding, it doesn't feel like a crisis. It is a crisis. If you look at what airlines are saying, et cetera.

And typically, no nation that's a crisis go waste. Learning from the crisis is depend more on indigenous supply of fuel. And hence, while I may not like it, I included coal.

You know, okay, the West may think oil and all of that, so even oil, when you burn it, releases carbon dioxide. We don't have it, what do we do? We can't spend $120 billion or more importing it.

We have coal, we will use it more. So you will see some bit of that changes in policymaking. And yes, we are a country which is super sunny.

Large vacant tracts of land. So renewables should get into a lot of focus. So you will see pace increasing there for sure.

So the Indian markets, whether, and I want to contrast this with Wall Street again, which is hitting record highs even as we speak, and therefore, no correlation with the energy shock that's sweeping across the world, and the economic shock. To what extent are the Indian markets reflecting what the reality is today? Whichever way you describe it.

Pratik Agarwal

So, we were together, okay, in Lehman Times. I'm just giving you an anecdote from that time. So we were in AXA group, we hardly had money, but we were AXA, so somebody from Lehman, head of research, and he was an Indian, global head of research.

He came down to meet us, and on the way out, we met in, I think, Bandra Hotel and all of that. I was walking him out, and I asked him, how are you thinking about your own future kind of slant to the question, just a week before Lehman happened. And he says, whatever may happen, market ultimately follows earnings growth and valuations.

You know, in between, it will go through and do its bit. Ultimately, that is how it is. Now, if you look at the index, I made some comment on IT, 15%.

Now, think of it, for growth investor like us, it doesn't appeal, but suppose you are a value investor. IT today is pricing in zero growth. Now, that kind of means we will have a strong rupee depreciation, and the reverse loop is, they will then end up with an earnings growth.

It is that kind of valuation. So for people who are value investor, it appeals. Same way, 35% of the index is banks.

Yes, macro is not good, foreigners own it, they are selling it, okay. But look at where valuations are. Private sector banks, who today may be growing similar to public, but people know have an ability to grow faster.

Now, the valuations are converging. You are getting these banks at some of the lowest valuations of past 25 years. Again, something which appeals to value.

So, there is a lot of bad news in the price, because remember, last one full year, we had earnings growth, our markets were negative. Okay, lot of the worries that we had, the US doesn't like us, we are not getting trade deals over. Okay, second, we are not getting earnings growth, the country is undergoing a slowdown, over.

So for three quarters, we have got good, nice earnings growth on the index, and more outside of the index, so that is over. So this quarter, let us see how it happens. My sense is the next quarter is where you get the hit of whatever is the medias crisis.

So there is a lot in the price, and then for growth investors like us, lot of these spaces which are new today, like software was in the 90s, and hence has a long, long runway of growth of a very high quantum. You know, there are tailwinds, all of what we spoke are tailwinds. So I think there is a lot for everybody, and hence markets are showing you what they are showing.

The resilience that you would not expect. The past has not been nice, no? If we were, so already when you see our valuation versus other emerging markets, we are 10, 15 year low.

We have not happened. If this was a market which was happening and strongly, the outcomes would have been different. But that said, if this period of pain increases, so today my thing is most of the guys believe it will get over in 15 days, if not 15, one month, one and a half month.

How long can a country stand up? They will find a way to get out of it. But if the thought changes and it becomes like, you know, two months, three months, six months, and high oil prices, people can continue to fight, no problem.

Hormuz should be open, so availability has to be there, point one, and two prices have to be lower, point two, and one will follow the other. If that happens over next one month, one and a half month, I think this is a great period to put in money for the good outcome later. That is what the market is showcasing.

If it elongates, if people start to believe, no, it's going the Russia-Ukraine way, and no 100 plus oil is there for six months or one year, you will have a 10 plus percent correction from where we are and the wider market will feel worse.

Ashish, you know, you talked about the behaviour, rather gauging the behaviour of people and using that as an input. So you talked about the transition between equities to gold, gold-silver, and now gold-silver also have got knocked. One of the things that seems to have happened is that it's going differently.

I mean, usually gold versus dollar was a certain equation, but now dollar is also rising and gold is falling, which many people didn't expect. So there are also newer responses that are being seen in the markets. How are you assessing or using this period to assess what or how people could be going next or how they should be going?

Ashish Soumaya

See, I think we are in a, you know, what my sense is that the war in West Asia seems to have, well, actually, see, there is one aspect which is the U.S. markets and the U.S. economy, and you briefly alluded to that. So if you just look at U.S. economy and the U.S. market, it looks like there is a major disconnect because the economy is worsening and the stock market is just going one way, right? And obviously, with poor economic growth, but high inflation, high yields, I don't know when they can cut rates really.

If going by past records, by now they should have been cutting rates, but it doesn't look like they can do that so easily. So one is that whole economic conundrum and the stock market is just making new highs. And then there is this whole energy thing, right?

So what is happening is that if you really ask me, generally speaking, you should have expected like you rightly said. But today what is happening is that the U.S. is obviously energy surplus. And while the war is causing strain, in some ways they are kind of outside of that whole quagmire, correct?

And that's the reason why they are holding up strong, their stock market and the fact that they are not so much impacted by this. So that, you know, like a couple of years back, people talking about U.S. exceptionalism, that was that time only related to stock market. But I think now even energy and stock market, both of these things are showing up there.

And if you see Middle East, now central banks are reported to have sold gold, really. So if you look at it, maybe, you know, my own sense is that somewhere down the line, the U.S. economy will start to show trouble. And then gold will again pick up.

I think it's only here and now that in recent times, even gold has got sold into. But then U.S. Treasury, stock markets, gold, silver, everything has probably got sold into. I think if you see March, pretty much all asset classes would have got sold into.

And generally the pace of central bank buying also went down and actually some central banks have been reported to even sell gold. And I think some of these countries also would have seen a flight of capital and they would have been under pressure to maintain their currencies also. So I personally, if you ask me, I wouldn't read too much into the fact that gold has come down.

My own sense of next few months, like medium term, is that gold will be in the headlines and gold will be something to really allocate.

Right, but any lessons in the way it's fluctuated? I mean, we've not seen this kind of fluctuation in gold and silver for decades. And so there must be a lesson in that.

Ashish Soumaya

No, so see, I think the lesson really, if you ask me, is that we are used to seeing scenarios where if oil goes up, Middle East should do well. This is the first time that oil is going up and Middle East is in trouble because they directly got impacted by that war, right? So I think that, I don't know what lesson I can draw right now, but the everlasting lesson is that there are no rules.

I mean, you're right that normally you would have expected gold to keep going up, up and up. And I would expect that if oil price goes up, I should be putting money into Saudi market or something like that, right? We have emerging markets funds.

We would have expected to do well in those portfolios. Usually oil goes up, their economies do well, but they are actually doing badly. By now, US actually should have, you know, the US stock market is just going ballistic.

I mean, I personally think that it's, like you were saying, the US stock market, and I think India is priced for reality or worse than reality. And they are priced for everlasting, you know, just imagine, I mean, $500 billion capex if somebody makes. In the near future, they need three to $4 trillion of free cash flow to come back for them to make the ROICs that they're expected to or supposed to make.

You know, what, open AI, right? No, the whole capex of $500 billion in a year, I mean, right, 2025. And this year, 600 billion or whatever they're projecting those crazy numbers.

And if somebody does so much capex, you expect them to get a few trillion dollars of free cash flow in the not so distant future. And all of that is getting priced in, right? One guy is showing capex, which has long depreciation.

And they're further elongated their depreciation. I mean, we depreciate our laptops in three years. They're depreciating data centres and servers in six years, right?

So one guy is depreciating it forever. The other guy is recognising the revenue. I don't have like a hard view on it.

But I think if we are talking about what is priced which way, I think we are priced as if khatam ho gaya hai, sir. I mean, we are heading that way, right? Because for 18 months, there is no movement in the market.

And then you are 12 to 15% down. And then you hear a whole host of negatives of why we can't do well, correct? And there, I think trees will grow to the sky kind of thing is happening.

So it's extreme.

Pradeep, your views? I mean, do you feel that sab khatam ho gaya hai? I mean, that's the kind of feeling right now?

Like we are at the absolute bottom?

Pratik Agarwal

We have been there forever. Beginning of civilisation to now, we will be there at the end. So khatam ho gaya hai, kuch nahi hua hai. And I keep saying this, there is no story like India. If you think long term, there is no promise like India. If you think long term, we are the last sustained growth economy.

This is a country where even cement, you know, I say cement because that's a space which will hit peak capacity first. We'll continue to grow 5, 6, 7% for next seven, eight years. Okay, it doesn't happen in too many places.

So we are blessed where we are. Yes, on the journey, sometimes somebody else does something better. So AI is the flavour.

Somebody got a chip, GPU done better. So till that demand satiates, you know, that narrow part of that economy will look better, that's fine. But you make monies when a trend continues for a long while because it takes time for people to spot the trend.

Then performance happens. Then distributors go to the clients to ask for money. So unless the trend continues for four, five years, you don't make money, you get whipsawed, right?

India is a country where a trend continues for the longest in this world. If you go to the West and see how managers invest, you may be shocked. So once again, just because the thought was negative, I just cheer up people.

So I was in Paris once again, one of my earlier organisations. And the English newspaper there had a story saying government changes regulations and now a new equipment would need to be fitted in lifts. French lifts were safe always, right?

They were trying to make it safer. And then they were calculating how much extra spend will be there and what is the boost to the economy that it will have. It was a 2% growth economy and a 6.5% real growth economy feels very different, okay?

And then when you speak to managers, so I was on an orientation tour there. How do you invest? Okay, it is all, at least what they told me was PE base, this is a space which has fallen in PE, I'm coming there, it will go back to normal long period, PE, I'll make money.

It's the manner of investing. You know, think of it, growth doesn't happen there, it's a 2% growth economy. Okay, do we have spaces, renewable, is it there in France?

Defence, two companies, very, very narrow spaces to invest. In India, you have a lot. Yes, yes, Korea may have memory, memory prices may have moved up, it's looking cheap, people are going there, okay.

So treat something as flavour of the season, now that season can elongate, we are there for a very long time. So that confidence should always be there.

Okay, questions and comments, yeah, go ahead.

Guest

Chandrasekhar here, I just wanted to understand how further will the rupee fall, you know, in the next maybe three months or so?

Ashish Soumaya

On the rupee, I think that, you know, most of the times people forget that there are times in the past where the rupee is violently appreciated also. Like if you see, for example, before Lehman crisis, rupee was 44. Through the crisis, it was 49.

But when the US economy really, you know, went in a slowdown, the rupee was 38. Then I'll remind you, when India was called Fragile Five, rupee was 69. But just before ILF was defaulted in 2018, so August 2013, rupee was 69.

And in early 2018, it was 62. Okay, so there are phases when it depreciates very sharply, and then it actually keeps appreciating. So I think you would be wrong to assume, and you know, in 2008, someone told us that rupee will be 85.

After that, it took 18 years. So my sense is that if we meet one year later, rupee will be actually higher than where it is right now. And I feel that a lot of that will come from the fact that right now, the world is, you know, behaving very lopsided.

I mean, like I said, you know, the US is behaving as if all trees will grow to the sky. So I think that is something to watch out for. There will be a flip somewhere in this calendar year.

You will see a flip in favour of emerging markets, more so India also. And with that, this FII direction, rupee direction, a lot of that things will completely change according to me.

Guest

Hi, thank you. My name is Sameer. My question is, on one hand, you're seeing consistent FII selling, and probably both of you referred to it.

But at the other end, we're also finally seeing a trend of large FDI being committed to India. Like in banking alone, you're seeing between RBL, Sriram, Yes Bank, almost 10, $12 billion coming in. A lot more, which is probably invisible through GCC is also happening, right?

How does one- And data centres, which yesterday, $15 billion.

Guest

Exactly. How does one make sense of that difference in behaviour?

Ashish Soumaya

See, I think FII data, I mean, I can tell you confidently, we are one of the larger FII, so I can tell you firsthand. 2000 to 2010, let's just remove it for a moment, because US was in trouble, all the emerging markets was the place to be in, okay? So let's start from 2010, when it has been counter to emerging markets.

And when, because 2010 to 2015, US has been on a tear. It's a 15-year compounded return is 15% in dollars. And emerging markets have got the short end of the stick.

So I'm specifically talking only 2010 to 2025, when emerging markets was not the place to be in. Do you know, in this 15 years, there have been only two years, which I can say are seriously negative. 2022 was some $22 billion.

2025 was some $18 billion. Other than that, out of 15, some 10 years is big positive. Two years are close to zero, and some three, four billion negative.

So, jitna jataya jaata hai, bataya jaata hai, utna FII flow negative hai nahi in reality. In fact, we, you know, sometimes people make these comments that they are selling it, you guys are buying up everything, and they are going to, five years back, you know, what was the criticism? Five years back, the criticism was that, you know, Indian citizens, we are employees and customers of these companies, but the shareholders are all foreigners.

So we are losing value. And now the criticism is exactly the opposite, okay? So don't bother too much about it.

My personal opinion is next three to six months, it will be a complete flip.

Guest

We have a host of legacy companies on our index, you know, that have been doing things a certain way, but would you be too worried if that India is not investing or is investing less compared to other, probably emerging markets in newer tech, or do you think India needs to do more on that front in terms of innovating?

Pratik Agarwal

So let me ask, you know, if you give me an option that there is an investment and it can go down to zero, okay? But if it succeeds, it can succeed like anything. Chances of that success is half a percent or lower than that.

Will I invest? How many people will invest? I bet zero.

That is the nature of a product company. That is the nature of AI. It is hugely risky.

We celebrate people who have succeeded. There are many who may not have, and you don't know whether the people that you are celebrating will eventually be the winner winner. A lot of cases, you know, you may have top one, top two, even the third and the fourth don't end up making money.

In many ways, it depends on how much risk capital a country has. Now, we are a poor country. You know, if we look around this room, half of the people, if not a larger percentage, would have come into this world with nothing.

This is a generation which has accumulated wealth for the first time in this country. To ask them to take risk and it can get blown, you know, doesn't happen so easily. That said, that said, it's not as if India is not innovating versus earlier.

You know, there was a time when we resisted typewriters going away. Computer, right? Now, we embrace change.

And what a corporate may not be doing, so for example, an Infosys had a great CEO once upon a time, he wanted to take it the AI way. Shareholders did not like it. That guy had to go out.

The earlier doctor had to come in because we can't take the possibility of money going down the drain, right? What is the way out? Do the same companies pay out dividends, right?

The shareholders, the dominant shareholders, get a hell of a lot of inflow every year. If we see where they are investing, one would find there is enough and more investment happening in two newer spaces. So maybe it is not happening in listed companies because listed companies, the mandate wasn't to do that while they may have a free, so Lever does a hell of a lot of free cash flow.

Is it their mandate to do AI? No, not.

Guest

We talk about a lot of these long-term themes, electrification, EVs, data centres, but a lot of that is also priced in. And when you talk about the long-term India story as well, India, nifty, in 2000 was 25% market cap to GDP. Today it's about 120, 125.

So overall themes, how do you play them? How do you right-size them? When the long-term thesis is intact, but then the valuations are too priced in.

Ashish Soumaya

See, on the long-term trends, when you talk about valuations and trends, we should remember one thing, that one of the things PE multiples stand for is visibility. So if you think something is going to grow 30% CAGR, but the visibility is two years, and if you think something is going to grow 6% compounded for the next 25 years, don't be surprised. So India is that 6% GDP, but going to grow at that rate for 20, 25 years.

So PE multiples are not just for growth. They are also for longevity, sustainability, good governance, conversion of profits into cash flows, return on invested capital. I think on all of those things, we are very, very solid.

Okay, so today if there is an IPO in the U.S., it will be SpaceX. Either say a potato wafer. So what you are making, what you are investing in U.S. to make alpha, and what we need to do here to generate alpha is very, very different. We are generating double-digit return with much lower risk profile. So I think all of this, whatever I said about U.S. and about India, I was just trying to say that all contra indicators are pointing that we are going to have a great time.

Okay, thank you very much. We've run out of time. I think we've taken away a lot of insights on how to look at traditional sectors, how to look at newer sectors, and where to be careful about the exuberance, and also to look at India and the world in a little more measured way.

Things might appear different outside and compared to India right now, but as both of you were saying, things can also switch quite fast, and that's what history has taught us. And again, within asset classes, again, we've seen a lot of shifts off late, but that's something to watch carefully for. So there's lots more.

I think, I'm sure you've taken away more in the nuance than in the headlines, and that's always useful when you're a long-term investor and investing for the future and investing for India's future particularly. So on that note, thank you so much for joining me.