Rajesh Kothari of AlfAccurate Advisors expects foreign investor inflows to pick up in the second half of FY27 as valuations become more reasonable. He suggests that companies making building materials and home construction products offer a better balance of risk and reward compared to direct real estate developers, driven by steady housing and infrastructure demand.
As the Indian equity market navigates shifting global economic signals, Rajesh Kothari, Chief Investment Officer at AlfAccurate Advisors, has shared his outlook for the remainder of the fiscal year. He expects a gradual return of foreign institutional investors (FIIs) during the second half of FY27. This potential shift in capital flows is closely tied to interest rate expectations, as more favorable conditions often encourage foreign capital to seek opportunities in emerging markets like India.
Kothari notes that recent market adjustments have helped bring valuations for many Indian companies to more comfortable levels. This moderation in price multiples is a key factor that he believes may attract foreign funds that were previously sidelined.
Construction Ancillaries Over Direct Real Estate
While the broader real estate sector continues to draw interest, Kothari adopts a nuanced approach. He expresses caution regarding the valuations of direct real estate developers, suggesting they may have become expensive. Instead, he points to the housing ecosystem—specifically manufacturers of building materials and construction products—as a more attractive area for investors.
This segment includes businesses involved in the production of pipes, electrical cables, sanitaryware, and paints. These companies are expected to benefit from sustained demand in residential housing and ongoing government-led infrastructure projects. Because these firms often serve as essential suppliers to a variety of construction projects, they can potentially capture growth from both new building activities and renovation projects without taking on the same level of land-bank or project-execution risk associated with direct developers.
Long-Term Potential in AI and Manufacturing
Looking beyond domestic construction, Kothari addresses the global Artificial Intelligence theme. He classifies AI as a nascent but structural opportunity. While he acknowledges that some global AI-related stocks have reached high valuations—which could lead to short-term price corrections—he maintains that the underlying investment cycle is strong. This cycle extends well beyond semiconductors to include areas like software, cloud services, and enterprise automation.
Kothari also remains positive on domestic manufacturing. He highlights that sectors benefiting from the government's Production Linked Incentive (PLI) schemes and the broader China-plus-one global manufacturing strategy remain solid, multi-year opportunities. Within this space, he is constructive on capital goods, defense manufacturing, electronics manufacturing services (EMS), and specialized engineering firms that have proven export capabilities.
Investors may monitor these sectors for developments related to margin sustainability and order execution, especially as government policy and private demand continue to influence the competitive landscape for these manufacturers.