Why The H-1B Visa Issue Has Hit The Markets
India's equity benchmarks fell for the fifth straight session on Thursday and this was their longest losing streak in more than six months
On Episode 688 of The Core Report, financial journalist Govindraj Ethiraj talks to Siddharth Vora, Head of Quant and Fund Manager at PL Asset Management. We also feature an excerpt from our series Manthan by Sahamati.
SHOW NOTES
(00:00) Stories of the Day
(01:00) Why the H1B visa issue has hit the markets more than the 50% tariffs
(02:53) Even as the world waits for singularity, Wall Street is concerned about circularity!
(04:28) A once in a few decades IPO boom this month will strain liquidity
(06:01) China is reaching out to more countries to keep their gold safely
(23:38) An interesting Govt-led initiative to unify all your insurance needs is under way
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Friday the 25th of September and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai, India's financial capital.
Our top stories and themes.
Why the H-1B visa issue has hit the markets more than the 50% tariffs.
A once in a few decades IPO boom this month will strain liquidity.
Even as the world waits for singularity, Wall Street is concerned about circularity.
And China is reaching out to more countries to keep their gold safely.
An interesting government-led initiative to unify all your insurance needs is underway.
And finally, Quant investing.
H-1B Jitters
India's equity benchmarks fell for the fifth straight session on Thursday and this was their longest losing streak in more than six months, thanks to IT stocks which continue to fall after persistent outflows following the U.S. visa curbs.
Regardless of how much impact the new 100,000 H-1B visa announcement will have, it does appear that the markets are more rattled by this at this point than the 50% import tariffs which kicked in last month. Now, the reasons are obviously quite straightforward. The high tariffs will have an overall limited impact on the economy, but will affect labour-intensive industries like gems and jewellery or apparel.
But on the other hand, they have low stock market exposure. While in the case of the H-1B visa issue, IT services companies and giants like TCS, Infosys, and Wipro are all affected to some degree or the other, maybe TCS more than the others at this point. And then of course, the larger conclusion is that the United States is not slowing down in its attempts or efforts to make life tough for Indian businesses or India.
So while negotiations are on and India's trade minister is back in the United States, what will emerge from all of this is not clear, at least not yet. So the Nifty and Sensex have now fallen 2.1% and 2.2% in five sessions. The Sensex was down 556 points to close at 81,160.
The Nifty 50 was down 166 points to close at 24,891. In the broader markets, the Nifty mid cap was down 0.6%. The Nifty small cap was down 0.57%. Now the rupee traded in a somewhat narrow range on Thursday, closed nearly flat with possible Reserve Bank of India intervention, which pushed back pressure from the weak stock markets and of course, foreign outflows that triggered it. The rupee closed at 88.66 against the US dollar, that's 66 paise against the US dollar, almost similar to its previous close of 88 rupees 69 paise.
Singularity
You may have been hearing about singularity, the point at which artificial intelligence becomes smarter than humans. What the markets are more focused on right now is circularity or essentially back-to-back investments in return for business.
Wall Street is concerned about risky circular relationships in the AI industry after some recent deals according to CNBC. Now, in case you missed it, NVIDIA has announced a $100 billion investment in open AI, but most of that money will go towards using NVIDIA's cutting edge chips. The two companies said the investments could reach up to $100 billion, paid out as AI supercomputing facilities open in the coming years with the first one coming online in the second half of 2026.
Now, Open AI wants to pay for NVIDIA's graphics processing units or GPUs through lease arrangements rather than upfront purchases, CNBC reported. By leasing the processors, open AI can spread its cost out over the useful life of the GPUs, which could be up to five years, according to sources that spoke to CNBC, leaving NVIDIA to bear more of the risk. Now, all of these are very smart moves, but on Thursday, S&P futures fell bogged down by a further pullback in NVIDIA and Oracle as investors also waited for unemployment data.
Now, NVIDIA and Oracle saw more losses earlier, and the reason is really questions over the state of the artificial intelligence trade. An analyst at Neuberger Berman told CNBC that the NVIDIA deal is the latest example of open AI raising money that it pours right back into the company providing the capital, and they're concerned about the circular nature of this deal goosing up everyone's earnings and everyone's numbers, but it's actually not creating anything. Speaking about circular natures, more small investors in India are set to transfer their savings to existing promoters, venture capitalists, and private equity investors.
This month, India could see 25 companies launch their initial public offers or IPOs in September on the main exchanges, making it the busiest month for such kinds of deals in nearly 30 years. More precisely, it will be the highest since there were 28 in January 1997, according to a Bloomberg report quoting primedatabase.com. Of the ones this one, 15 companies have already raised about a billion dollars, more than 8,000 crore rupees. The remaining 10 are expected to raise a total of about $500 million, which is about half of that, according to India's National Stock Exchange, quoted by Bloomberg once again.
Another 75 companies have regulatory approval. They include the blockbuster LG Electronics IPO and Tata Capital, but they have yet to launch. An analyst told Bloomberg that it's an annual ritual for Indian firms to try and cram in their IPOs by the end of September because dragging their deals into October would force them to audit an extra set of earnings and then update them into their draft prospectuses.
Bottom line, don't expect the markets to really go anywhere in the next month, given the amount of liquidity that'll be sucked out.
China Goes For More Gold
Gold rose on Thursday as geopolitical and economic tensions highlighted safe haven demand, while investors waited for US economic data for clues on how the Federal Reserve would see or look at its monetary policy trajectory. According to Reuters, spot gold was up to about $3,756 per ounce after hitting a record of $3,790 per ounce on Tuesday.
Meanwhile, Bloomberg is reporting that China wants to become a custodian of foreign sovereign gold reserves in a bid to strengthen its standing in the global bullion market. The People's Bank of China is using the Shanghai Gold Exchange to court central banks in friendly countries to buy bullion and store it within the country's borders, according to people who spoke on the condition of anonymity to Bloomberg. Now, this effort has taken place over recent months and has attracted interest from at least one country in Southeast Asia.
The move would also obviously enhance China's role in the global financial system and furthering its goal of establishing a world less dependent on the dollar and centres like the United States, UK, and Switzerland, says Bloomberg. Now, countries, including India, have been buying up gold as a hedge against mounting geopolitical risks, which obviously has created the opportunity for the People's Bank of China to offer a haven for an asset obviously seen as a counter or a buffer to economic shocks. Real estate dip.
Real estate consulting firm Anarock is reporting a 9% annual sales decline in the top seven cities in India at about 97,000 units for the third quarter of 25 against 1,07,000 or 107,060 units in the third quarter of 2024. However, sales continue to outstrip new supply in the new quarter, reflecting continued market health, Anarock says. Now, despite the fall in sales volumes, the sales value in that period rose 14%, and this obviously reflects the high volume of sales in the luxury and ultra-luxury segments.
So the two Western cities, that's Mumbai and Pune, accounted for 48% of the total sales in the top seven cities in the third quarter of 2025. All top cities individually recorded a dip in yearly housing sales except Chennai and Kolkata, which are up 33 and 4% each respectively according to Anarock.
A Market's Backdrop
A machine-led investment approach is different from humans being at the very fundamental level cold and clinical in buy and sell investment decisions. The quant approach, as it's called, also depends on the algorithms that drive it and the thought that's gone into creating those algorithms. Now, there are several quant funds in India, though not as many as markets like in the United States.
I spoke with Siddharth Vora, who manages Prabhudas Leeladhar, or PL's flagship equity strategy fund called AQUA, which stands for Adaptive Quantitative Unbiased, and ALFA, which is a flexi-cap portfolio management scheme, and another one called MADP, which is a multi-asset dynamic portfolio. Both hold about 500 crores, or rather more than 500 crores in assets, and reflect what PL calls its man-with-machine approach. I asked Siddharth Vora, also the head of quantitative investment strategies and fund manager of PL Group's asset management business, how he was looking at the markets at this point as a quant investor.
TRANSCRIPT
Govindraj Ethiraj: Can you illustrate a couple of these models or tools that you use and how they work or what are they constructed off, which have been providing you
Siddharth Vora: So, when you talk about risk, you need a holistic perspective on risk, from flows to breadth, to valuations, to how many new highs and lows are being made in the market, to SIP accounts, to dollar index, to overall safe versus risky currencies in the world, to the whole bond deals and credit spread perspective, to style factor spreads, quantitative style factor spreads like value growth, momentum, quality. When quality and low risk are doing well, it's a defensive environment.
When momentum value, high beta are doing well, it suggests the market environment is improving. To whether higher beta sectors are doing well or lower beta sectors are doing well. All of this comes together in our risk model.
And it gives you a very holistic picture that from a sector perspective, from a small cap to large cap spread or a micro cap to large cap spread, everything tells you that okay, risk appetite is worsening or improving. So, say we have 20 different indicators here in our risk index, we call it the riskometer. It's a holistic perspective whether the risk appetite is improving or worsening and as of now, it's improving sequentially for the last four months, five months.
And it pretty much bottomed out to a multi-cycle low in around the end of Feb, first week of March.
Govindraj Ethiraj: And when you say risk, this is risk on the part of who?
Siddharth Vora: No, no, it's a risk appetite.
Govindraj Ethiraj: Okay, on the part of investors.
Siddharth Vora: Investors.
Govindraj Ethiraj: Okay.
Siddharth Vora: So, it is a risk to the environment. People don't want to take risks. They want safe assets.
They want large caps. They want quality. They want low risk.
They want gold. They want debt. They don't want equities.
Risk on means we are willing to take risk, willing to put money in small caps. Just to, you know, add more conviction to this, over the last, in the month of August, we had 15% cash in our portfolio. We pretty much deployed all of it.
Over the last five months, we've kept 5 to 15% cash in our portfolio as a risk buffer and to reduce the volatility of the portfolio. We've been fully deployed since the first week of September. And that call has been playing out pretty well for now.
Govindraj Ethiraj: Right. And this is, I guess, a good time to ask you. So, you specialise or you positioned yourself as a specialist in quant funds.
Siddharth Vora: Quantitative investing.
Govindraj Ethiraj: Quantitative investing. So, tell us about what that means and how is that different from any other form of mutual fund investing?
Siddharth Vora: So, we don't have any mutual funds.
Govindraj Ethiraj: Or asset management investing.
Siddharth Vora: So, quantitative investing basically tells you all the investment decisions you're supposed to make, right? How do you allocate across assets like equity, debt, precious metals, REITs? How do you allocate across assets at different points of the market cycle?
Within equity, how do you decide your allocation between large, mid and small? Within that, how do you decide your sectoral allocations with sectors overweight, with sectors underweight, with sectors zero weight? Which investment style to use in which phase of the market?
When should I use a momentum and value tilt? When should I use a quality tilt? When should I use a growth orientated strategy?
When should I use a low risk orientated strategy? So, you can't use the same strategy and same style mix in every part of the market. So, you got to shift that as well.
When to keep portfolio beta high? When to keep portfolio beta low? Which stock to pick?
How much to allocate to a particular stock? When to buy that stock? When to exit that stock?
So, there are so many decisions you need to make. Traditionally, you use experience, judgement, wisdom, intuition, and understanding. All that is based on research only.
All these qualitative things which are subjective in nature to make all these decisions. In a quant fund, all of these decisions are made objectively, basis rules, basis systems, basis absolutely watertight, airtight processes. And it is a systematic data driven method to invest.
Rather than using judgement, research, or subjective interpretation of anything, you convert everything into objective rules which can be calculated, which generates a score, which generates a numerical output. And that is all quant investing.
Govindraj Ethiraj: And why did you choose this method of investing as opposed to what everyone else is doing?
Siddharth Vora: So, personally, you need a personal bent also to be this kind of a person where you want everything to be well defined, structured, process driven.
Govindraj Ethiraj: And I am sure some investors like that as well.
Siddharth Vora: Globally, 40% of money is managed this way. 45% is managed passively and less than 15% is managed actively. Actively means traditionally.
So, this is just US data. And if you go back 30 years, 85% was actively managed, which is now down to 15. In India, 82% today is still actively managed.
16, 17 is passive and less than 2 is quant.
Govindraj Ethiraj: So, you are in the 2%.
Siddharth Vora: I am in the 2%. It is slow. It is small.
But over the next decade, we believe with technology, with relevant talent, with superior access to data now finally that India has, and with the advent of AI, I think quant is going to have a runaway two decades for India.
Govindraj Ethiraj: So, let us come back to breadth. You said that breadth has shifted or changed or expanded in recent months. So, what has changed there and why is that giving you confidence?
Siddharth Vora: So, there was a market like 2018-19. That is a polarised market where top 10-15 stocks will hold the nifty index up. But broadly, the markets are weak, small caps are weak, mid caps are weak, the nifty 500 equal weight is underperforming.
So, there is no breadth in the market, which means there is no real participation. There is some sort of index management or whatever you call it. That is not a good sign.
That is not a healthy market to be in to make money to make alpha. Markets where across stocks, the participation is good. Those are markets which we call stable, which we call healthy.
Right now, between August 24 to March 25, India was in a weakening breadth environment. So, the breadth was reduced. Finally, it reached some sort of cyclical low where enough interest was generated.
You can call it value buying, you can call it opportunistic buying, where now the breadth has started recovering. Of course, a lot of fundamental triggers are also in place for that.
Govindraj Ethiraj: Okay. So, let me pick on, I mean, not specific companies, but at least how you look at sectors and what has been, I mean, or rather what has been capturing your attention in recent times. So, let me and also ask you a question in a slightly different way.
So, if I were to ask you what are your top sunrise sectors, as in sectors that you are still beginning to bet on or just bet on recently, and also what are your sunset sectors, as in sectors, you know, some people say IT, for example, or even consumer goods, which maybe are no longer your favourite, are good, maybe long term steady, but not necessarily your choice right now.
Siddharth Vora: Yeah. So, I'll have to wear two hats to answer this question. From a quant lens or from a quant fund manager perspective, we don't believe in any of these jargons, sunrise, sunset, we have no attachment to any sector or any stock.
Govindraj Ethiraj: Perfect.
Siddharth Vora: Data comes in, the model is built, the portfolio is created, data changes, the portfolio is rebalanced with zero emotions to any sector, to any stock for that matter, I'll be very honest. So, we could have been in my first phase, right, like when we launched the fund in 23, 23 to 24, we had gone heavy on industrials, defence, cap goods, PSU, real estate, automobiles, energy, these were the sectors, basically all cyclical, high beta sectors, we made a lot of money in that phase. 78, 79% returns in the first year versus 25% Nifty and 36% BSE.
That was one phase of the market, pure risk on phase. That time we tilted our portfolio towards high beta sectors. Then we got a signal to shift out of high beta sector somewhere in August, exited defence, PSUs, all of that was out of the IT, healthcare, utilities, communication, that was the second phase, which was at risk transition phase of the markets, our portfolio shifted accordingly.
Then it was now this is the recovery phase of since the last three, four months, our portfolio has been heavily shifted towards materials, metals, mining, because we believe that is a good space to be in quantitatively. The other allocation is to financials. Within financials, we are focused on NBFCs and asset managers and insurance companies, not private banks.
Between Jan 25 to April, May 25, we were heavily tilted on private banks, because we wanted to be in financials but stay within the defensive section of financials. Then we wanted to increase beta so we tilted towards NBFCs. So, from a quant perspective, there is nothing like sunrise or sunset.
Sector strategy or sector rotation has to be in line with the market environment. In a certain market environment, the consumer staple sector, which is absolutely low growth, going nowhere, trading at very high p's, might come into our portfolio, because for the next two or three months that might give me alpha. How does it give me alpha?
Markets might fall 10%, this might fall 5%. So, I am 5% better off than the markets and that is a source of alpha. In a recovery market, markets might go up 5%, metals might go up 15%.
So, it is a recovery. Does it also mean you are churning a lot? So, quantitative strategies have high churn, anywhere between, you know, somewhere around 200% per annum.
So, that is the quant answer. Now, the fundamental answer is, of course, fundamentally, which are the sunrise or sunset sectors, you know. For example, theatres, we believe that that is a deep sunset sector.
You know, we do not see 5 year, 10 year visibility in that sector. IT, for example, is going to have challenges. With the advent of AI, you know, India was traditionally catering to a different set of IT services altogether.
And the talent pool, the skills that are needed to cater to the whole AI wave, we still have to build that. So, we could see some challenges. And of course, with the current set of policies, which could be transient in nature, the IT sector is likely to be under pressure in the near to medium term.
Govindraj Ethiraj: And what about, so these are things that are not looking good. You mentioned theatres and IT.
Siddharth Vora: Yeah, that is just on top of my head.
Govindraj Ethiraj: And when you look in terms of the positive side, I know you talked about metals and minerals, but metals and mining under your quant.
Siddharth Vora: Yeah, we believe in asset management companies. That is a great sector to be in for a very long term perspective as well. The business model, the unit economics, the return on capital, the incremental capital needed to grow along with demand drivers and investor awareness makes it a very multi-cycle sort of play.
And India's overall mutual fund participation as a percentage of GDP is still amongst the lowest in the country, in the world. So, long runway of growth, very clean business, well regulated and sticky annuity business. So, we believe that is a great sector to be in for the long term.
Other than that, we believe consumer discretionary, focussing on premiumization and branded plays within the higher end of consumption, that like luxury consumption, I think that will also do well. Within that, we are particularly constructive on hotels as a multi-year sector to be in. These are just a couple of sectors.
I mean, I could have many, but these are just on top of my mind, hotels, asset management companies.
Govindraj Ethiraj: And so, this is another sort of stock umbrella.
Siddharth Vora: And metals and mining would be tactical in nature. We are not very bullish from a five-year perspective, but our views can change. Got it.
Govindraj Ethiraj: So, that is stocks. As you now look at other classes or asset classes, I mean, gold is given phenomenal returns, 37%.
Siddharth Vora: Fortunately for us.
Govindraj Ethiraj: Tell us about how, I mean, did you see it early or how early did you see it?
Siddharth Vora: So, since Jan 2024, we have had 28% allocation to gold in our multi-asset fund. And that has obviously done very well. And that has also been a quantitative decision, because multiple indicators that we track for gold to be a part of our portfolio have all been very, very bullish.
From US bond yields to dollar index to the overall volatility in the world markets to equity gold spreads. So, gold does well when there is an inflationary environment, when there is geopolitical stress, when bond yields are on their way down, when there is a need for safety or a safe haven kind of a hedge in the portfolio, and the dollar is weak, and central banks are buying. And also there is a wave of de-dollarization.
So, subjective triggers, objective triggers. From every perspective, gold has been very well positioned and will continue to be so, will continue to be so. And we have had roughly 30% of our portfolio in gold in multi-asset, in our multi-asset fund for the last one and a half year, which has played out beautifully.
Govindraj Ethiraj: And gold at about $3,700 an ounce, and heading to 4,000, someone said 6,000. What's your sense? I mean, isn't it likely to hit a natural barrier somewhere?
Siddharth Vora: We unfortunately don't have any target prices, neither on equities, nor on gold. We just look at the data and say, okay, things are still looking good. So, we continue to stick to our positioning till things don't change materially, because we don't think we can predict where it will stop or where it will go or where it will turn from.
Those predictions are tough to make. So, we don't try to predict any of these things. We just try to stick to the positioning till things don't change materially.
An Insurance Portal
India is the 10th largest insurance market in the world and could be the sixth largest in the world in about seven years. Now, despite all of that, there is no clear single window into many of our insurance policies and activities.
So could a single online market for insurance products and services backed by the insurance regulator, that's the Insurance Regulatory Development Authority, and major state-owned insurance companies change all of that. The newly launched BIMA Sugam will connect all insurance stakeholders, including insurance companies, policyholders, intermediaries, repositories, and external data sources. And more importantly, all insurance requirements, including life, health, and general insurance, which means life and health, which you know, and general insurance, which could include things like your cars or motorbikes, could be on this BIMA Sugam.
In a core report podcast, Shalini Gupta, Chief Policy and Advocacy Officer of Account Aggregator Sahamati, spoke to Rakesh Joshi, the Chairman of the BIMA Sugam India Federation, the organisation that runs the new BIMA Sugam platform, and began by asking him how this new portal would work.
TRANSCRIPT
Rakesh Joshi: Bhima Sugam is a place where you can buy insurance, you can service insurance, you can settle insurance.
And in case you have a grievance, you can put in your grievance. On one hand, Bhima Sugam would look to leverage. And you remember what I told earlier, you know, the data pools.
So Bhima Sugam would look to leverage the data pools, that is the India stack. And on the other hand, provide analytics. Bhima Sugam is an industry led initiative, blessed by the regulator.
And it will carry the entire insurance ecosystem. So typically, Bhima Sugam will look at assisted sales, as well as direct sales. Assisted sales would be those by the agents, brokers, they can come in there.
Remember one more thing. Today, the agents also have issues. By coming on to Bhima Sugam, Bhima Sugam will look to address many of their issues, in the sense, you know, what is their billing like?
How many policies have they sold? When should they get their money? All these things will be there.
They will be registered with Bhima Sugam through the company, which has recruited them. They will have a number, and will do their business. If you want, you can come directly to Bhima Sugam and do your policy.
Imagine you have five insurance policies, you want to change your address there. Today, you have to go to five different insurance companies. If you could do so, at the click of a button, and all the five addresses got changed, nothing like it.
Your journey has become much easier. For settlement of claims, why do you need to fill in all those forms? Rather, go on to Bhima Sugam, fill in your form there, and your claim would be settled through Bhima Sugam.
Today, what the industry actually has is a very non-standardised view. So, company A requires this kind of form, company B requires a different kind of form, company C requires a third different kind of form. The biggest thing which digitisation does is brings about standardisation.
Once things are standardised, chances of these things going wrong becomes null. So, Bhima Sugam will look to actually standardise the entire claim process, the process of a company selling insurance, as well as servicing insurance. As I said in my earlier example, the life insurance company does not look at, today it is not looking at how many motor accidents I've had.
Bhima Sugam will be able to provide such analytics to the insurance companies as to how or what has my history been. This, therefore, will enable the insurance company to come out with much better underwriting and possibly more scientific insurance pricing. All this will help who?
The customer. And the customer carries his insurance policy in his pocket. So, remember one thing, ma'am, nearly 70 percent of India is in the move today.
A person who has gone as an agricultural labourer from maybe Bihar to Punjab, let's say he faces a problem in health, he has to be operated on. What does he do? Either he calls up his wife back home and says, please send my policy, or he doesn't use his policy at all.
So, he says, why should I have a policy at all? Imagine if he is given that facility where he can carry his policy in a dematerialised form, in his phone and go to the hospital and say, here, here's my policy, please admit me and do my operation. So, if I were the labourer, I would get my hepatitis taken off without paying any money.
He is now a happy person. He has more faith. The other thing is, today, we all say insurance is a push product.
The reason is, I as a customer do not participate in the manufacture of the product. It is the insurance company who decides what's good for me. Tomorrow, if I participate in the manufacturing, obviously, my way of looking at insurance changes.
The same way, at some point in time, banking was a push product, it became a pull product. Same way, insurance, I'm sure, at some point in time, will move from push to pull.
