FII short positions show India lagging behind AI boom, says Mihir Vora

Foreign institutional investors remain heavily short Indian markets as the country lags other major Asian peers that have benefited from the global artificial intelligence (AI) investment cycle, said Mihir Vora, chief investment officer at Trust Mutual Fund, which managed assets of ₹3,933.98 crore in the October-December 2025 quarter.

He added that currency weakness and the lack of a clear trigger for sectoral growth have further weighed on investor confidence, while a possible trade deal could act as a key confidence booster.

These are edited excerpts from the interview.

Q: It is very surprising in recent days to have a net short position of 92% in FIIs. And they are fearless. I don’t know what they can see, and neither do we. Do you have any sense of the overall markets and the fact that FIIs have been so net short and they are so confident of continuing to be net short?

A: First of all, currency doesn’t help either, which also adds to the lack of interest and trust. And if you step back and see what happened in 2025, you will see that India has been left behind. I’m not just talking about India’s absolute underperformance compared to emerging markets, but we didn’t have a theme like AI. So, Korea, Taiwan, Japan and China caught up with the United States and did even better than the latter thanks to the hardware and software theme of AI, which India did not have.

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Hopefully, with the AI ​​hype waning, our normal 6-7% growth should see us through. The trade deal is a big deal that is expected to be one of the biggest triggers for FII sentiment.

Q: India’s best case was AI coverage. If AI gets worse or optimism moderates a bit, then India will do well. But at least for now, in terms of profits, global profits, there is nothing.

A: The only problem is that stock prices tend to determine the actual outcome. So, to maintain these AI stock valuations, you need positive surprises. Even if you meet the high growth requirements, they may not be enough. So let’s hope that India finds its place this year.

Q: Do you think the IT sector is past its worst and we are seeing a slow reset – interest could return in Indian IT?

A: We have to do it stock by stock. Our preference has been towards the fastest growing IT services companies within the services pack, which are generally mid-cap stocks. Large caps are still stuck in this single-digit growth trajectory, and if they continue to do the same thing, without changing the business model, I don’t see that changing, whether with AI, or because of AI, or without AI. The fact remains that even without AI, they were in a single-digit growth phase.

So, structurally, if you were talking to me about a three to five year view, I’m underweight large-cap IT stocks. I will be more specific to stocks in terms of mid and small caps.

Q: But these mid-cap growth IT companies like Persistent or Coforge? Do you have both in your portfolio?

A: Yes, we have some.

Q: But is there comfort in valuation?

A: The market is always paying attention to the hunger for growth, and I don’t see large IT companies demonstrating this hunger for growth. When you see that the promoters or managers are sufficiently motivated, you will get this bonus. In some cases, they have demonstrated this type of growth over at least eight to 24 quarters.

Q: One of the IT companies you hold in your fund that has been growing inorganically has made a very significant acquisition. You like the kind of companies that are hungry for growth, that take on big acquisitions that are beyond their reach, and that think they will reward shareholders.

A: I would not give a bonus for acquisitions. We also need organic growth, but as long as the company has a certain appetite for risk and it complements the overall strategy, everything will be fine. But I’m not a big fan of acquisitions for the sake of turnover.

Q: Metal smelting continued. But how to play it? In the past, you have played tactfully. For now, it appears that non-ferrous metals are the main beneficiaries compared to ferrous metals. Is this also your preference? Or are you using other means, maybe pipes, maybe some of those ancillary stocks as well, steel or aluminum?

A: Structurally, our investment philosophy is not favorable to commodities per se, as we seek long-term capitalization. But tactically, it is a very strong movement, and for good structural reasons. Regarding aluminum, I would just like to add that it’s also about energy, because aluminum requires a lot of energy, and how energy costs are increasing in the United States because of AI. So maybe this is also a by-product of the AI ​​boom. Similarly, copper is also a derivative of AI, as it requires a huge amount of energy, as well as energy production and distribution. Even though data centers themselves require a lot of cabling, this also powers AI. So, part of this demand is linked to electric vehicles, AI and renewable energy. This is what creates it.

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The way we play it is directly through certain names of zinc, copper and aluminum. We’re not too exposed to steel. I don’t think steel is that kind of structural story. But it is interesting to note that, indirectly, we are playing it through the exchanges as well as some gold finance companies. Overall, we are most overweight certain gold finance companies and exchanges.

For the full interview, watch the attached video