Whalesbook
Valuation Discipline Amid Currency Pressure
Currency depreciation, particularly the current move exceeding the typical 3-5% annual assumption, necessitates greater valuation discipline from investors. For private equity firms like Kedaara Capital, achieving target dollar-denominated returns requires stronger rupee performance. This means entry valuations must be attractive enough to compensate for currency erosion. Consequently, a gradual slowdown in investment deployment may follow if currency pressures persist.
Domestic Demand as an Economic Shield
Despite near-term market and currency noise, India's economy remains relatively insulated from global trade disruptions and tariff-related risks. Kejriwal highlighted that most portfolio investments are not exposed to tariffs, with sectors like financial services being entirely domestic. Consumer businesses are predominantly driven by Indian demand, citing examples like Vishal Mega Mart. Even global-facing brands such as Lenskart derive only a small portion of their revenue from overseas markets, illustrating this insulation.
Capital Reallocation and the China Factor
While global capital pivots away from China due to concerns over returns and policy, Kejriwal cautioned that this reallocation is not exclusively for India. Capital is also flowing to Japan, Australia, and other markets. He emphasized that China's current challenges are likely temporary, and the country may again become competitive, drawing capital back over time. India should therefore be cautious about overestimating the durability of these inflows, viewing the current pivot as a temporary spike rather than a constant trend.
India's Persistent Market Attractiveness
Despite currency depreciation, India continues to deliver strong rupee-denominated returns and distributions to paid-in capital (DPI) across Asia. This track record remains a key draw for global investors. Kejriwal pointed to robust rupee returns and strong DPI outcomes as evidence of India's enduring appeal. While near-term volatility may foster caution, the fundamental structural growth story, anchored in domestic demand and improving returns, keeps investors engaged, albeit in a more disciplined and selective environment.