Hi, and welcome to the Core Report Special Edition. A big question we keep getting asked is, when are Indian markets going to shine again?

We have obviously seen a tough three years. The benchmarks have stayed roughly where they are, and there have been heavy outflows, including from foreign portfolio investors, who continue to sell as if there is no tomorrow.

So the question is: what can bring them back? What will make India’s market more attractive, both to foreign investors and to Indian investors? Where does the value lie? Is it time to look beyond the benchmarks, and if so, where exactly do we train our sights?

I am joined today by Ajit Dayal, founder of Quantum Advisors, a veteran investor and a presence in India’s markets for many years. Ajit, thank you so much for joining me.

Thanks for having me.

In the introduction I have tried to cover some of the ground we will discuss. Broadly, Indian markets are not looking attractive, for fairly statistical reasons. But to understand what has gone wrong, we need to go back a little in history. So take us there.

Thank you. I would love to talk about where India is today and where I think it will go. But, as you say, we need to see where we have been.

I am going to begin with a very large number: India’s place in global GDP. There was a professor from the University of Groningen, Angus Maddison, who about 20 years ago (he is no longer alive) came up with a wonderful chart that goes back 500 years. It shows how the shares of China, India, Europe and the US (not even born as a nation then) in global GDP have changed.

Clearly, in the 1500s, before the Industrial Revolution, India and China occupied half of global GDP. Then came the Industrial Revolution and the imperialism imposed on India, China and others, and you can see the European share increase dramatically. The US was born in 1776, so it is about 250 years old now. Then you see the US and Europe increasing, and China and India shrinking to almost nothing.

Around the 1950s, just after our independence and after Mao’s Great Leap Forward, which was really a great leap backward, you see them shrink even further. We turned socialist and became less of a market economy. We had independence and a huge number of challenges, and we were building out.

By the 1990s, you see China reforming and, 10 to 12 years later, India reforming from 1991 onwards. China’s red and India’s orange shares in that chart start to increase again.

If you extrapolate what is happening, and we are now seeing the world become more Asia-centric, China and India will occupy 35 to 45% of global GDP in the next couple of decades. That is a given in many ways. Of course, many things can go wrong, such as unemployment, and whether we actually get there. But we are on that chart, and that is what we expect.

What is interesting is that while the GDP story is well established and recognised in the world, allocations of capital to India are still very uncertain. So let’s move the lens to capital flows in India and India’s weight in the MSCI All-Country World Index.

I started Quantum in 1990. You call me a veteran; I feel like an ancient mariner. In February 1990, 36 years ago, I wrote an article in the Asian Wall Street Journal (now the Wall Street Journal) about how India could loosen the bull reins. Having studied economics and done an MBA, I looked at the macro data, and it was clear that India was going to be in deep trouble. Something would have to happen on the reform side.

As we know, the July 1991 reforms are credited by many to the IMF and the World Bank saying, “Fix your economy and we’ll help you fix it.” It was a cold-shower approach, which was fantastic. In 1990, India’s market cap was only about $60 billion in today’s terms, and our GDP was $350 to 360 billion. So market cap to GDP was about 20%. Today we are between $4 and 5 trillion, depending on the exchange rate and the index, and our economy is about $4 trillion. So we are at about 100 to 110% market cap to GDP. We have come a long way.

Along the way we made some good policy steps and some not-so-good ones. Getting FDI and FPI flows was fantastic, starting from 1991. Then SEBI was created in 1993 and the NSE was born in 1994. Before that we had the open-outcry auction system, and it took six months to settle trades. If one person had not signed his share certificate, and there was a 10-lakh-share order by an FII, the entire trade would fail over as few as 100 missing shares.

All that got cleaned up. Later, the introduction of Aadhaar, starting around 2012 to 2014 under Nandan Nilekani when he was part of the UPA-II government, and then extended and firmly established by the current administration since 2014, changed the whole dynamic of settlement and the ability to buy shares. The whole ecosystem is now fantastic. Sometimes it is too fantastic: people like Jane Street can take advantage of our poorly informed retail investors and make tonnes of money off them in the F&O markets. But the system works well.

The other way to look at this is Indian retail participation in equities, which was dismal in the 1990s. Only 3 to 4% of total household savings went into financial markets like stocks. Now that number has crossed 14 to 15%. After Modi’s win in 2014, flows into mutual funds increased dramatically. After COVID there was also a surge of new investors who had nothing to do at home, started buying shares and made money.

So domestically, the share of household savings going into markets has gone from 3% to 14%. Household savings are roughly 25% of GDP, so about a trillion dollars. And you see the SIP flows of ₹3,000 crore, ₹5,000 crore, ₹7,000 crore coming in as net flows even in dismal markets. That is the flow of money from retail.

Foreign money has not only paused, it has withdrawn. I think that should be the government’s focus. We have the domestic investors excited. We know they love shares. They have to learn about asset allocation, which we can touch on later. But what do you do to get foreign capital in?

Foreign capital coming into India is challenged by a number of things, some of which the government can control and some of which it cannot control at all. Before I jump into those, let’s look at why foreign investors invest in any market. Their economics is clear: they look for countries where GDP is growing. When GDP grows, a company in that country has a tailwind. It is a two-way, symbiotic relationship: as companies grow in revenue and size, they contribute to GDP.

If GDP is growing, companies have good revenues. If companies have good revenues, mathematically they should have better operating profits because of operating leverage. Higher operating profits mean higher net profits and higher earnings per share, and higher earnings per share should mean higher share prices.

That is a simple, not simplistic, model of why people from Canada, the USA, Europe or Japan will allocate to emerging markets: find the countries that are growing, and find the companies and sectors from which we can make a profit.

Now, India’s GDP has grown. People fight about the statistics, but we are doing reasonably well. Since 1980 we have had 12 governments. Five have been single-party governments and seven have been coalitions. The average real GDP growth over this 44-year period has been approximately 6.3%.

A question to you, and to the viewers: under which kind of government has GDP grown more, the five single-party or the seven coalition? You have probably seen our charts, so you may know the answer. But if you ask anyone internationally, they will say it has to be single-party. The answer is that GDP has a better chance of growing above the long-term average under coalition governments.

We have had five single-party governments so far, two under Prime Minister Modi in his first two terms, and he has now been in a coalition since June 2024. Even among those five, if you give the benefit of the doubt on the statistical change from rebasing the economy, only one under Prime Minister Modi was better than the long-term average. If you take out the statistical recalculation, zero out of five grew better than the long-term average.

The moral of the story, if there is one, is that coalition governments are far better for India’s GDP growth than single-party governments.

We have done some crazy charts that show this across the world. Look at the BRICs (Brazil, Russia, India, China), and we added Turkey for good measure. Strongmen or strong parties rule these nations, and there is a disconnect between GDP growth and stock market returns. Since 2000, China’s economy has gone from 100 to 800 in dollar terms, while India’s has gone from 100 to 400. So China’s GDP has grown twice as much over the last 25 years.

But stock market returns tell a different story. $100 invested in India in 2000 is now roughly $400, whereas in China $100 is now $200. So we have grown twice as much in stock market returns, even though our GDP grew only half as much. There is a huge gap between GDP growth and stock market returns.

If a foreign investor had a choice to invest in publicly listed stocks, would they choose the MSCI India Index or the MSCI China Index? If they chose China, they would have made 50% less profit than in India, in US dollar terms, over the last 25 years. I won’t talk about the last year or two, because of AI and whatever else is happening.

The reason for the gap between GDP growth and market returns is governance, or the lack of protection. Governance fails at a number of levels. In China, if you are Jack Ma and you have built the fantastic Alibaba, and then you say something against the Chinese government, someone taps you on the shoulder in Beijing or Shanghai, you disappear for six months, and your company’s economics are rewired. You lose that flow of profits to Alibaba.

It is the same with Putin. If you are in Russia and say something bad about Putin, you get shipped off to Siberia or poisoned in London, and the economics of your company and sector get rewired. If you were an investor in any company that was against Putin, or against Xi in China, you suffered.

In India we have not had such instances at all. But we have had governance failures at the company level. We have had discussions about what is going on at the Tata Group now, what happened at HDFC, and what happened at ICICI a couple of years ago. These governance queries keep coming up.

It could also be in the startup world. You may have many VC-funded enterprises, and then you find the founders are not doing well and there are governance issues, either after or before listing. So whether you are a venture capital, real estate, PE or stock market investor, you want not only GDP to grow, giving a company a chance to grow its revenues and profits, but also a fair share of that growth, and that comes from governance at the corporate level. If there are issues there, you have a problem.

Now, returns also get taxed, and this is the key part. First there is the tax on long-term capital gains, and then there is the currency. One is a tax on your profit. The other, currency depreciation, is a tax on your entire capital. If your capital just sits there and the RBI lets the currency go, you lose 4 to 5% per annum, as in the last two years. That is a massive penalty to pay, particularly in a world where interest rates have gone from near zero after COVID to 4 to 6%, heading towards 6% most likely in the US. Even in Japan, rates have gone from negative or zero to 2.5 to 3%. In Europe and Germany, they have gone from negative to 3%. France may go up even more. We don’t know what is happening out there right now.

So when you are competing for capital, you cannot have a policy that taxes it like this. You had a former SEBI executive director, Ananth Narayan, on your show a couple of months ago, on February 14th if I remember, at the start of the year. He said that under OECD norms India is an outlier. We are the only nation, among developed or senior developing countries, that taxes capital at the place where it makes the profit, rather than following the established norm of taxing it at the source, where the capital comes from.

Unless the government lets this sink in and recognises that there are not a million people standing in line to get to India (that is a myth), nothing will change. China plus one hasn’t worked, and we have seen this over decades. No matter which government was in power, we had India Shining, India Rising, Resurgent India, Incredible India. These are nice slogans to have. And yes, India is exciting. India is fabulously exciting. We just established that, over the next couple of decades, China and India will be significant players in global GDP. So there is money to be made.

But if you put hurdles along the way, whether governance hurdles, a taxation hurdle, or the depreciation of your capital through a weak currency, then you are not going to get the capital.

Let me pick up on a couple of points, because these are slightly different. You talked about the China example of GDP growing but markets not keeping pace, and India being the reverse, at least for...

Until recently.

Is there a larger lesson in this? Because then the strongman or single-party theory does not fully hold. China has grown in the past, then slowed down, and GDP has continuously grown. I’m talking about the market. India obviously goes up and down, and right now we’re down.

The lesson for a foreign investor is that China’s GDP growth is fabulous, and it has grown twice as fast as India’s, but I need to focus more on governance. That is the lesson for the foreign investor.

The lesson for us is: don’t worry if you grow less than China. If your governance is strong, you will actually get more capital than China does. Keep on doing what you are doing. This clip of 6.5% long-term GDP growth is very sustainable. And if you have the right policies for FDI and for foreign capital, whether it is coming into venture capital, private equity, real estate or public markets, you can grow at the 7 to 8% that Jim O’Neill said we could, which was fiction in 2004. But you can make it a reality if you get things right.

Jim O’Neill of the...

Of Goldman Sachs’ BRIC report. They came to India in 2004 and gave a talk at the President Hotel, and they spoke about the BRICs. I was in the first row, and I raised my hand when they finished. I said, “I have a question. You said we can grow 8% per annum, and we spoke about the demographic dividend. How will all these people who are looking for jobs get jobs?” It is okay to say you have 10 million youth coming in every year for the next 15 years, so you can make them an economic engine. But if you don’t find them jobs, they become a drag, not only on government coffers and subsidies but also through social unrest. You are seeing what is happening in France. You are also seeing protests in India over the NEET exam. These things are all interlinked.

He said, “I’m an economist; I make an assumption.” It is nice to make an assumption on a spreadsheet. But from the dream team of Manmohan Singh, Montek Singh Ahluwalia and Chidambaram until today, we haven’t come up with a proper structure that fulfils the requirement of creating seven, eight, nine or ten million jobs every year. I think most people say hardly two to three million jobs are being created, out of the 10 million required, since 2005. So we have a lot of unemployed youth.

I’ll come to governance in a moment, but let’s talk about foreign investment and what really drives it. You talk to a lot of investors. I know you spend a lot of time overseas meeting investors, including those who invest in your offshore fund.

Yes, correct.

They were investing, and then at some point, more than two years ago now, they suddenly stopped. They hit a peak in September 2024, and since then they have reversed. None of what you have said so far seems to answer why they stopped at almost one particular point.

I don’t think it was a particular day.

No, but they were net buyers until about two or three months ago.

Correct. It goes up and down. They have been buying sporadically. One factor is the pure valuation. India was at an extremely expensive point, and that started right through July, August and September 2024. We wrote to our clients in September 2024.

September 2024, yes.

Yes. We did not call a market peak. We said that, with the index at 85,000 to 86,000 at that time, standing where we were, we saw an 11% return over two years. Eleven percent on 88,000 gives you roughly a 100,000 index. We are at 74,000 now. So we were right about the market: 11% in rupee terms over two years. Annualised, that is about 5% per annum for the period from September 2024 to September 2026. Take away the currency, which is normally 2.5 to 3%, and you are at 2% in dollars. Even then, the government two-year bond was giving 2.5 to 3%. So why would you want to be in India, taking the risk, with so many taxation headaches, when there is no reward for the risk?

So the market became expensive, and now, looking at history, that was the peak and the markets came down. But from a foreign investor’s perspective, I think two other things went wrong.

One is that the tax on long-term capital gains came into place in 2018-19. Most foreigners were not aware of it because they were just net buyers. You only worry about tax after you have sold and see that your cheque is a lot lower than you thought it would be. When they started selling, they realised, “This is crazy. I’m paying this capital gains tax.”

On top of that, we had a regime change at the RBI. In December 2024, Governor Shaktikanta Das retired. Under his tenure, in 2023-24, the rupee was very stable. Money was flowing in, with no shocks. From a foreign perspective, that is a massive positive and fantastic: my capital is not being destroyed. Forget the market action, my capital is not being destroyed. Superb, I can put money in.

In December 2024 we had a regime change. Unfortunately, the timing of the new RBI governor, Malhotra, was poor. He gave an interview, I think in March 2025 (I believe it was with ET; I can’t remember if I’m allowed to name the publication). He said we believe the rupee is too strong compared with the renminbi, Indonesia’s currency and others.

I’m not saying it was an incorrect statement. But the policy mindset of the Reserve Bank of India and the Government of India has always been: let’s get exports moving, and we have to weaken our currency to make exports competitive, because that is what the other guy is doing. This beggar-thy-neighbour policy, as it is called in economics, never works for anyone in the end. And in an environment where the world is trying to import less (after COVID and the recent geopolitical events, the policy of every country is to become less reliant on others, which means importing less), you are trying to boost exports and, in doing so, weakening the rupee against the dollar. You are penalising those who can give you money immediately, which is the FPI flows. So I think we have to change the way we look at our currency.

Of course, India will remain a weak-currency country for a long time because we need capital from international sources to grow. Generally, barring the US, if you need capital you have a weakening currency, and you strengthen your currency through exports over time. But his message was that the rupee is overvalued and should be let slip. His timing was very unfortunate: on April 2nd, 2025, Trump came out with “Liberation Day” and put tariffs on India.

So you had an RBI governor signalling to treasury and FX desks around the world, “Take my currency down, guys, it’s too strong,” and a 20-year-old kid on a currency desk begins to whack the currency. Then Trump came out with his big tariff chart showing rates for everyone.

The Rose Garden, exactly. Then there was uncertainty about India’s tariff rate. You may have heard Lutnick, when he was here, give a talk in December last year or earlier this year. He said India was meant to be the number two trade deal we would sign, with England number one. He said Trump thinks like a real estate guy: when you build a building, you sell the ground floor at a cheap price, and as you go up the tower, you sell at higher prices. So the best rate was kept for the UK and the second-best rate for India. Then India never showed up. We went on to the third floor, the fourth floor, the fifth floor, and Indonesia and Malaysia came and said, “Come on, do a deal with us.” We kept waiting for India, and India never showed up, so we gave the others better deals.

Why did India not show up? Probably because, in April and May, we had the war with Pakistan, and Trump started claiming that he was the one who had brokered the peace. Prime Minister Modi, like other prime ministers in India, has had ceasefires with Pakistan before. But you can’t be sitting in the White House, Zelensky-style, or like the South African president when he went to meet Trump, where both were bamboozled in the White House, and have Trump suddenly say, “You’ve not thanked me for giving you peace.” So, rightfully, we stayed away from the US and didn’t end up there.

But all that uncertainty over the trade deal was a big story of 2025. Then AI started, by September or October of that year. So you had a weakening rupee and uncertainty over a trade deal, and oil was not in the picture at that point. And you had the AI story evolving, and India is not in the AI space at all.

So the mindset of the international investor was: here is a country taxing me on my profits, taxing me on my capital, unsure what it will do with the trade deal and unsure what will happen with AI. And it is expensive. So why should I put capital there? Take the money out and go somewhere else. And that is what happened.

This year, on February 28th, we were all set with our February letter, ready on the Saturday to go out on Monday. It was to tell people that the upside potential we spoke about in September 2024, where the market would go up 11%, had gone to 48%. We said the markets had come down, there had been a time correction, and we were actually getting excited about India, with 48% upside from where we stood. That was on February 28th, and that morning Trump let loose on Iran. Suddenly all bets were off the table because the price of oil went up. The rupee went into a free fall, becoming weaker, and again the uncertainty started about where India sits in the global geopolitical map.

So a lot of things have gone wrong for India. There has been a time correction and a price correction. Depending on which index you look at, it came near its previous peak, or even surpassed it, at the start of the year, and then went into free fall again, as we have seen over the last couple of months.

Foreign flows have been heavily affected by uncertainty over energy, over where the war in the Middle East is going, and over supplies of fertilisers, natural gas and oil coming to India. They have also been affected by how we as a country register in the foreign mind. Are we focusing on GDP? Are we focusing on AI? Are we weakening the currency for exports? What is our policy? And most importantly, what is our policy on taxation?

Every time the FM is asked about this, her bland statement is, “We have had many discussions on this, many people are talking about it, and we don’t see something happening before the Budget.” To me, that is like taking a gun and shooting yourself. Until you fix these issues, you have to make capital more welcome. It is not about doing foreign investors a favour; we are doing ourselves a favour, because we need foreign capital to get to that 7 to 8% growth rate on a sustainable basis.

You talked about governance, and that is really the bottom-up, or micro, angle to this. There are two aspects. First, India’s Q1 results, and now Q2, where we are right now, seem good, broadly good and even better than expected in some cases.

So India is performing alright despite everything we have spoken of. The governance problem you spoke of obviously affects some companies or groups, but it is not a problem with all companies and all promoter groups. There are good companies, well-performing companies delivering good returns. So if you look bottom-up, and assume some of these issues are in our control (many of what we have talked about so far are not), and keeping tax aside for a moment, where do we stand?

Let me make a point about governance and investing. Many allocators to India have allocated capital through indices. The MSCI India index is a very popular international index. When we measure the governance of each company in the index, I would say probably 30% of the index is uninvestable from a governance perspective.

Can you elaborate on that?

Sure. Certain companies are big chunks of the index, whether it is the NSE 50, the BSE 30, the 200 or the MSCI. MSCI India has roughly 164 companies, I think; the BSE 30 has 30, the NSE 50 has 50, and there are the NSE 100 and 200.

We have a team that measures what we call the integrity score. We started it in 1996 with just 10 factors on every company, and it has now expanded to over 200 factors.

We measure every company and ask: can I, as an international or local investor, believe that this management is doing good things that will not penalise the company through fines, taxation, greenhouse gas emissions or whatever else? Or are they doing bad things in terms of trade or related-party transactions?

We look at things that affect the minority shareholder or any long-term shareholder. If those issues are resolved, the company gets a plus score. If the issues are weak, it gets a minus score.

In our estimate, 20 to 30% of the BSE 30, NSE 50 and MSCI indices is uninvestable from a foreign perspective. The Europeans in particular are worried about governance. When they first started buying India, they bought the index, which is passive investing, and which I think is wrong.

I have a wonderful quote from John Bogle, the founder of Vanguard, on that, but that is a different story. They went for passive investing, and then they realised that the index had certain companies they did not want. As they understand India better, they ask, “Why are we owning those companies? Maybe we should not be in India if the indices have a big chunk of these poor companies.”

I’ll give an example. Facebook, now called Meta, has Mark Zuckerberg with multiple voting rights, and that is considered poor governance. Elon Musk smoking pot while giving an interview is considered poor governance. If you add up the poor-governance companies in the S&P 500, it may be in the middle to high single digits now, given where share prices are.

Many investors feel they don’t want to invest in an S&P with Tesla or Meta. So they customise the S&P to exit Tesla and Meta, for example, and then they have 498 companies. Whatever share those two companies held, about 7% of the S&P, is spread among the other 498. That is how they do it.

But in India’s case, it is too much of a headache. As an international investor, I don’t even know which of these companies are really good, but I suspect some of them are not treating me well. They have too many related-party transactions and too many strange things happening. And when you read about the Tata Group, which is again a big chunk of the indices and of market cap, you become more concerned.

So while the earnings story is decent, and the bottom-up demand story for many products is decent, the problem is that governance is not so great at the company level. And at the country level, at the policymaking level, treating foreign investors as if we don’t really want you around, charging you capital gains tax and weakening your capital with a weak currency, sends very strong messages. What we can fix is governance, and what we can fix is taxation. And what we can try to fix with better messaging to the market is the view that we welcome foreign capital and that we are not going to bend over backwards to please exporters. Let exporters become more efficient.

I had this discussion with a very well-known global economist, and she said, “No, that’s not the way to look at it; you have to boost exports.” I am not a genius in economics, but I can tell you this: around the world, capital flows matter much more than export flows in today’s day and age. Anyone who doesn’t believe that is not listening and not reading what the flows are like. Flows will determine your currency far more than setting up a factory that will one day export, or one day sell Apple phones, or whatever it is.

China is an example.

China, and us too to some extent. But China is so well entrenched in supply chains that you can’t just shut down imports from China. You can shut down imports from India because we are not as entrenched in the supply chain as China is.

And China plus one never came to India; it went to Vietnam. We asked a few people how that happened and what went wrong, and a person of Chinese origin gave me a fabulous, very simple answer. He said that in China plus one, factory managers from China have to come and live in the plus-one country. When they come to India, the food is different, the culture is different, and people look different.

In Vietnam they fit in: people look similar and eat similar food. It is easier for me to convince someone to do China plus one in Vietnam than in India, for these soft reasons rather than hard ones. I need that manager to train the local staff, and they feel more comfortable in Vietnam than in India. That was a very interesting insight.

And what is the John Bogle quote you were going to share?

In 2010, we wanted to set up an ETF or index fund at Quantum Mutual Fund, where we have an actively managed value fund. I had managed a Vanguard fund for four and a half years while living in America, the Vanguard International Value Fund, from 1999 to 2004.

So I had met John Bogle and knew Vanguard, and I took the liberty of sending him an email. He is called Jack. I said, “Dear Jack, I’m setting up this fund. We have an actively managed value fund and are thinking of doing an ETF. This is how they build the index in India, and it sounds a little strange to me. What do you think?” I sent him data from 2000 to 2009 on the constituents.

Take the BSE 500 index, which has 500 stocks. A passive index is meant to be passive: once you create it, it is not meant to change too much. I, as an active manager, may churn, buying and selling stocks much more than an index. But take a guess: in 2008, in the BSE 500, an index with 500 companies, how many stocks were changed?

10%?

543.

So the entire index was churned?

Yes. On average, Indian indices churn about 15 to 20%, which is crazily high. Why? Because entire sectors are new: insurance is a new sector, asset management is a new sector, real estate is a new sector. When you build an index, you look backward in history at which companies are already established and large, and you buy those. But these newborn industries keep coming along, which an active manager can pick, and then the index has to change.

If you look at the BlackRock MSCI India fund in New York, it lags its own MSCI index by 1% every year since inception, because of transaction costs. Each time you buy and sell a stock, the government charges you STT and capital gains tax, so less money goes into the market each time you churn to match the index. The index providers, and I have complained about this to SEBI, should put a transaction cost on the index, because you are comparing an active manager who pays all these fees with an index that just makes a change in an Excel sheet. That seems pretty unfair to me. It is not like for like.

It’s like comparing apples and oranges.

And then there are the sectors. You have financials and you have IT. IT has halved its index weight, and financials have changed too. Banks have been changing: some have done well, and BE has had a phenomenal run. ICICI has done well, HDFC has been pathetic in some sense, and Kotak has been flattish and has picked up recently. Some banks have been disastrous and some have done well.

But you are right: the financials’ index weight is roughly 38% or more, depending on which index you look at. IT used to be 15% and is now 8 to 9%. These two bellwether sectors have been flattish to down, with IT sharply down, and that has hurt performance. That again goes to AI, and that is where we can end. Reliance has done nothing. If you had bought Adani, that has done well, but both those companies may not necessarily fit the governance standards of international investors.

So you have the AI theme internationally, and changes happening here in large companies and in certain sectors like banking and IT. But that is cyclical and comes and goes. AI, in our view, is not a bubble. There is a bubble in terms of which company you may invest in internationally and whether it will survive. But AI as a product, like the internet, the steam engine or the telephone, is real and here to stay.

There was a Bain report the other day which said AI companies need to reach about $7 to 8 trillion in revenues over the next five to seven years to justify their valuations. I think that is achievable. Going from zero to $8 trillion sounds crazy, but keep in mind there will be a few winners, as with Facebook versus everyone else, Instagram versus everyone else, WhatsApp versus everyone else, Google versus everyone else. The outcomes will be binary, and the few that survive will be huge, as Google and Facebook are. So reaching $7 to 8 trillion in revenue for the whole industry may happen. But the company you invest in may not work out. That is a different discussion.

Coming back to what you said about consumer staples: India is still a growing economy with hundreds of millions of people demanding products and services, from clothes to chappals, toothbrushes, shaving cream and homes to live in. The whole demand chain is still there. That is why we turned optimistic on India in February earlier this year, and we are even more optimistic now, given where the markets are.

But we recognise the global suspicion about India. First, what is your AI story? Well, that is a story that will come and go; that is fine. More importantly, there are governance, taxation and currency. All three are within our control. Our job in India is to build the platform and make our markets ready to receive investment whenever the theme turns, rather than trying to copy a theme. I think chasing AI just to sound more market-savvy is idiotic. Understanding AI to get your economy ready is very sensible. But getting your markets ready to attract capital when the passion for AI is over is the most important thing this government has to do. I really wish they would do it sooner rather than later.

That is a good note to end on. Thank you so much for joining me.

Thank you very much for having me.