IPO rush ahead: What should retail investors watch out for? DSP’s Jay Kothari explains
Indian equities have become an unlikely AI hedge, DSP’s Jay Kothari told Mint Money. India’s stubborn underperformance may actually signal a turnaround in the near future.
Kothari estimates that Indian equities have cumulatively underperformed emerging and global markets by nearly 70% over the past two years. This gap is something markets haven’t previously witnessed at this scale. Kothari believes this unusually-wide divergence will eventually mean-revert, allowing India to outperform.
Historically, India had outperformed comparable markets significantly before AI dominated global narratives. Before the AI-led rally, Indian equities had compounded at roughly 20%, compared with gains of 5–6% in Korea and Taiwan.
Strong earnings and healthy return ratios still characterise many Indian companies today. However, missing technology segments have overshadowed these underlying fundamental strengths recently.
“Globally, all three components of tech—software, hardware, and semiconductors—are present. In India, there is only one. We do not have hardware and semiconductors, which have driven 50% of the growth in emerging markets and the world,” he added.
Kothari, therefore, advocates patience and measured global exposure rather than mechanically following technology-heavy benchmarks. Kothari suggests that patience remains essential.
“Rather than focusing on market cap buckets, we’re focusing on companies that are mispriced, not just because they’ve underperformed, since underperformance can even be structural,” Kothari said.
IPO rush ahead
Regarding the impending IPO rush, Kothari flags important implications for capital allocation. Increased IPO supply naturally diverts capital away from existing secondary markets. Even foreign investors are reportedly selling secondary holdings to fund IPO purchases.
He cautions retail investors against blindly chasing hype-driven investment decisions. Instead, thorough research or trusted expert guidance should inform investment choices.
Kothari warns that market momentum can attract investors without guaranteeing profitable outcomes. He emphasises that time in the market matters more than timing the market.
Finally, Kothari cautions against unrealistic expectations shaped by recent exceptional performers. Some companies have delivered extraordinary returns over the past two years. This has blinded perceptions, making modest 15% gains seem comparatively disappointing.
However, achieving 30-100% compound annual growth remains genuinely rare across markets. Investors shouldn’t treat such exceptional outliers as realistic universal benchmarks.
“I’d strongly urge retail investors not to get swayed just because something is in momentum or high in decibels. Do your study, or trust somebody who has the ability to study that company, and then put your money to work because sometimes momentum will suck you in but won’t let you make money,” Kothari said.
