Interest in India strong despite volatility: Bank of America chief

MUMBAI: Interest in India remains undiminished despite near-term volatility, according to Vikram Sahu, India CEO and country executive at Bank of America.

"Corporate interest remains strong and unchanged in its conviction," Sahu said, adding that strategic investors continue to take a long-term view of India, drawn by its scale, growth prospects and governance framework.

Investor sentiment is also showing signs of improvement. "Participation at our flagship 2026 India conference increased by 30% this year," Sahu said, highlighting "a growing willingness to evaluate whether current levels offer a more compelling entry point than what we saw 18 to 24 months ago." On the lack of interest from foreign investors, Sahu said, "Ultimately, capital responds to fundamentals," adding that as regulatory friction reduces and business conditions improve, "foreign investment will follow in a more durable and sustained manner."

Sahu attributed the decline in foreign institutional investor participation, now at its lowest level in over a decade, initially to elevated valuations. "About 18 months ago, India was trading at a significant premium to its historical averages, which set a very high bar for expectations," he said. This was compounded by external uncertainties, including trade negotiations with the US, the West Asia conflict affecting energy markets, and the broader implications of artificial intelligence on India's growth narrative. "When you combine elevated valuations with a more uncertain macro backdrop, it is only natural for investors to step back, recalibrate, and wait for more attractive entry points," he said, adding that such cycles are not unusual and tend to self-correct.

Sahu said trade-related concerns have moderated with multiple agreements, including a framework with the US, while trade flows have remained resilient. However, he cautioned that West Asia continues to be a key source of uncertainty. "A swift resolution would remove a meaningful overhang, while a prolonged situation would remain a headwind, though one that is not unique to India," he said.

From a banking perspective, Sahu sees a wide opportunity set, particularly in manufacturing, which currently accounts for about 15% of GDP against a target of 25%. "Some view that gap as a constraint; I see it as clear runway for growth," he said. He cited electronics manufacturing as an example.

On valuations, Sahu said foreign investors are returning selectively, focusing on companies with durable competitive advantages, earnings visibility and strong governance. For a broader shift, he identified two triggers: "First, greater clarity on the situation in West Asia. Second, a definitive end to the earnings downgrade cycle."

He added, "We are moving closer on the latter, but we are not fully through it yet," while noting that capital markets activity remains robust, with IPO demand supported by domestic flows alongside FII participation.

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