What is the story about?
The sharp rally in global equities driven by artificial intelligence is not comparable to the dotcom bubble, and India’s relatively muted market performance in 2025 had more to do with valuations and earnings than missing the AI wave, Kotak Mahindra Asset Management MD Nilesh Shah said in an exclusive interview with FirstPost.
Rejecting comparisons between today’s AI boom and the late-1990s tech bubble, Shah said the fundamentals are vastly different. “In the dot-com era, companies were getting valuations without profitability, and many were borrowing heavily. In the AI era, companies are making profits and are not necessarily leveraged,” he said, adding that while there may be exceptions, the broader trend does not point to a bubble.
On the argument that India underperformed because it was late to the AI playbook, Shah dismissed the view, noting that stock market returns are ultimately driven by earnings growth and governance. “There aren’t many AI plays in Brazil, but that market has done well. Performance is linked to earnings growth, governance, and delivery,” he said.
According to Shah, Indian equities corrected because valuations were stretched while earnings growth slowed. “Our valuation was high, and earnings growth was low. Obviously, we had to correct,” he said, while pointing out that the broader market has still delivered consistently. “This is the tenth year in a row where the Nifty has given positive returns on a calendar-year basis.”
Using a cricket analogy, Shah said investors should not expect outsized returns every year. “You don’t expect Sunil Gavaskar to score a century in every inning. The law of averages catches up,” he said.
On commodities, Shah reiterated a positive outlook on precious metals, especially gold and silver. He said his firm has been bullish on gold since 2020 and turned positive on silver in April 2025. The key driver, he said, is sustained central bank buying. “Central banks are diversifying their reserves by buying gold, and some are even rumoured to be buying silver. As long as this buying continues, prices should remain supported,” he said.
Looking ahead to 2026, Shah said India remains reasonably well placed in the global risk-reward equation compared with the US, Europe, and other Asian markets. “It is not just returns that matter, but confidence in those returns. Investors put money where they feel comfortable,” he said.
India’s growth potential, governance standards, and long-term track record should continue to inspire investor confidence, Shah added. “If we keep growing faster than our peers and maintain better governance, we should be fine.”
Rejecting comparisons between today’s AI boom and the late-1990s tech bubble, Shah said the fundamentals are vastly different. “In the dot-com era, companies were getting valuations without profitability, and many were borrowing heavily. In the AI era, companies are making profits and are not necessarily leveraged,” he said, adding that while there may be exceptions, the broader trend does not point to a bubble.
On the argument that India underperformed because it was late to the AI playbook, Shah dismissed the view, noting that stock market returns are ultimately driven by earnings growth and governance. “There aren’t many AI plays in Brazil, but that market has done well. Performance is linked to earnings growth, governance, and delivery,” he said.
According to Shah, Indian equities corrected because valuations were stretched while earnings growth slowed. “Our valuation was high, and earnings growth was low. Obviously, we had to correct,” he said, while pointing out that the broader market has still delivered consistently. “This is the tenth year in a row where the Nifty has given positive returns on a calendar-year basis.”
Using a cricket analogy, Shah said investors should not expect outsized returns every year. “You don’t expect Sunil Gavaskar to score a century in every inning. The law of averages catches up,” he said.
On commodities, Shah reiterated a positive outlook on precious metals, especially gold and silver. He said his firm has been bullish on gold since 2020 and turned positive on silver in April 2025. The key driver, he said, is sustained central bank buying. “Central banks are diversifying their reserves by buying gold, and some are even rumoured to be buying silver. As long as this buying continues, prices should remain supported,” he said.
Looking ahead to 2026, Shah said India remains reasonably well placed in the global risk-reward equation compared with the US, Europe, and other Asian markets. “It is not just returns that matter, but confidence in those returns. Investors put money where they feel comfortable,” he said.
India’s growth potential, governance standards, and long-term track record should continue to inspire investor confidence, Shah added. “If we keep growing faster than our peers and maintain better governance, we should be fine.”
