In this latest FundCalibre podcast, Andy Draycott, manager of the Chikara Indian Subcontinent fund, explores why foreign investors have withdrawn billions from Indian equities, whether concerns about the rupee and AI are justified, and why rising household wealth could transform consumption.
India has gone from emerging-market darling to a source of funding for the booming semiconductor trade, despite its domestic economy continuing to grow rapidly.
This interview looks inside a concentrated portfolio targeting India’s domestic growth story, including private banks, quick commerce, hotels and aviation.
The team also discuss India’s enormous manufacturing opportunity and why its growing importance to the global economy could ultimately bring international investors back to the market over the coming years.
Why you should listen to the interview: India’s stock market and economy appear to be telling two very different stories. This interview explains why foreign investors have been selling despite strong domestic growth, while exploring the businesses benefiting as Indians become wealthier, borrow more, travel more and embrace entirely new ways of shopping, spending and consuming.
This interview was recorded on 28 September 2026. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
Why foreign investors are leaving a booming economy
“I think, interestingly, India, as you said, is averaging very high growth rates. If you take the last three or four years, we’ve been close to 8% GDP growth. Domestically, there is a boom going on, from everything from private bank lending to private CapEx.
“I think the dichotomy is occurring largely because emerging markets as an asset class tend to be all grouped together. So you have Taiwan and South Korea, which have GDP per capita much higher than India. If we go back to 2024, when India was the darling, India was around 23–24% of emerging markets, the benchmark that is. Roll forward to today, India’s fallen to around 11%, and the beneficiary of that has been Taiwan and South Korea, which have dramatically jumped up in the benchmark indices.
“The reason for that is clearly because of semiconductor supply chains. The American hyperscalers — the Amazons, the Microsofts, the Googles — need to fund the data centre boom, and that obviously needs semiconductors. So the earnings cycle for South Korea and Taiwan has been exponential.
“If I look at the last year, what we are seeing is the domestic economy accelerating. I’ve never really seen such a large dichotomy between the domestic economy, which is really doing very well, and the absence of interest from foreign investors. I think that’s something that is leading to an opportunity.
“If we take the last two years, around $60–70 billion of equity has left the Indian market. The second element to it, which I think is a myth — and myth busting is something that I’m having to do quite a lot of at the moment — is the perception that India’s a loser in the AI race. There are six million people that work in IT services in India.
“There is a hypothesis that those six million jobs are under threat as a direct consequence of the LLMs in America. That narrative versus reality is that we’re actually seeing services export revenue climbing in the mid-teens in India. There’s something called global capability centres in India. That’s multinational companies opening up in India, and they’re hiring multiples of thousands of employees. Last year, they employed 200,000 employees.
“So actually, what we’re seeing is the opposite of the narrative, but you can never let something get in the way of a good story.”
First Happy Meals
“What is unique to India at the current moment in time is that it is going through an economic evolution that you only go through once in your country’s history. Within that economic story lies a country with 800 cities and the largest consumer base of any market in the world.
“As that consumer moves away from basic subsistence living and the sort of goods that it uses on a day-to-day basis to stay alive, it moves into things that are more aspirational in nature and more discretionary in nature.
“What we do is address that through looking for any company that can aggregate that consumer base of what is known in the market as a TAM, total addressable market. So we’re looking to get companies that can grow into the 1.4 billion people that is very unique to India.
“The second element to it, which is unique to us, is that we look for very under-penetrated levels within the categories that are operating in the country that can grow for multi-years without ever really coming to a pause.
“If I put that into a picture, probably the simplest one I would be able to pull out is McDonald’s. If you take something like McDonald’s, it’s affordable, it’s very much for the middle classes. In India, that story is exactly the same as any other country in the world. As you take your family out for their first experiences, McDonald’s would probably be the first cab off the rank.
“If you look at the penetration levels of McDonald’s in India, it is incredibly low. They’ve only got close to 800 stores across the whole of the country. That equates to around one store for every nearly 1.8 million people.
“If I juxtapose that against somewhere like the UK, the UK’s got 1,500 stores, or one for every 45,000 people. So the runway for growth for McDonald’s in India is just enormous. I think the steady state that we’d be looking for once it’s completed its build-out would be circa 20,000 restaurants.
“That’s where we position the portfolio. What we’re not trying to do is be everything to everyone. We’re trying to aggregate the growth in those very under-penetrated categories that offer you a degree of predictability that you perhaps could see having occurred in every other developed market in the world, from the UK to China to the US.”
India’s leap from the corner shop to 11-minute delivery
“We like companies that typically address a problem. If I give you some examples of where that is the case, one of them would be in quick commerce. It’s a sector that’s effectively evolved over the last three or four years in India.
“India’s always had problems with supply chain management, and it’s always had problems with perishability of food going into the cities. One such company that we own, which was spawned by graduates from the Indian Institute of Technology, which is effectively like the MIT of India, has built a business where they can deliver everything from a lipstick to an iPhone to your door within an average 11 and a half minutes. And they can do it profitably.
“The average order value of this company is less than five US dollars, and they make a 5% EBIT margin on it. What that effectively does is, one, it brings down the overall inflation within the economy because they’re sorting out supply chains that get into the cities in a much more sophisticated manner than the traditional mom-and-dad stores.
“But two, it’s democratising consumption, and it’s allowing people exposure to new, what they call stock keeping units, SKUs, that they weren’t previously being exposed to.
“This company is highly innovative. Just to put it into perspective, they have two and a half thousand what they call dark stores across India, servicing up to around 300 cities, although it’s typically in the top 20 cities. They can effectively get something to your door very quickly for a lower price.
“It looks like India is leaping from the traditional mom-and-dad shopping straight over the Tescos and the Walmart format, directly to this model of dark stores across neighbourhoods that can deliver to your door through riders in a very rapid period of time.
“To put it into perspective, fridge sales in India are starting to drop because people are actually just buying just in time for everything that they need within their house. Eternal, I was with them last week, they would talk about their super users ordering anything from milk to butter, or ghee in India, up to nine times a day. This is a company that’s employing now 600,000 people in India, all the riders that they’re employing.”
Why India could become the world’s secondary factory to China
“If we roll forward five years, what does this look like? What I would say is that India’s going to be the third-largest economy in the world, just on maths. So it will be the US and China, and then it will be India. The representation of people’s money in India through global indices is minuscule. It’s less than 2% of MSCI World. So nobody owns this as a thematic.
“India is very much focused on becoming a manufacturing hub. If you look at the success of the last 20 years, they’ve been highly successful in services exports. They’re around 6% of global services exports, but they’re less than 2% of manufacturing exports. So they don’t make very much, despite the fact that they have a very low aggregate cost of labour. It’s $3,000 for an Indian labourer. It’s $15,000 for a Chinese labourer.
“We’re already starting to see tangible signs of manufacturing turn up in India. So iPhone now make 25% of their iPhones in India, and that used to be zero three years ago. What I think we will see is India starts to aggregate light manufacturing and high-spec manufacturing and move away from the steel and cement story that we’ve seen over the last 10 years.
“As they do that, I think they will become the secondary factory to China for the world. That will more than likely improve the economic model of India. It will firm up the currency at improved growth rates. And I think it will make it more relevant to global investors in terms of their asset allocation as well.”
Conclusion: India’s recent market performance may have disappointed international investors, but the underlying economic story looks very different.
Today’s guest shares why the current disconnect between foreign investor sentiment and economic growth could prove an increasingly important opportunity for long-term investors.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The writer’s views are their own and do not constitute financial advice.
This information should not be relied upon by retail clients or investment professionals. Reference to any particular investment does not constitute a recommendation to buy or sell the investment.
Main image: Indian flag, India, naveed-ahmed-9Dt4WutvwDs-unsplash
