'Never seen so much pessimism regarding India': Fund manager rejects slowdown fears

A fund manager has dismissed growing pessimism around India's economy, arguing that fears over artificial intelligence, investment slowdown and the rupee are being overstated.

"Never seen so much pessimism regarding India in my twenty years of studying macro and markets. Not in 2008, 2013, 2020," Harsh Gupta Madhusudan, an investor and fund manager at Ionic Asset by Angel One, wrote on X.

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The comments come at a time when concerns over slowing private investment, weak foreign direct investment and global economic uncertainty have triggered intense debate about India’s growth outlook.

Madhusudan, however, said artificial intelligence could work in India’s favour rather than hurt its services economy. "AI is a positive for India. There is absolutely no sign of Indian service exports slowing down in the latest data," he wrote. "If a $20k guy in Pune is to be laid off, a $200k guy in Philly is even more on the chopping block. If anything, giving them both the latest AI reduces any competence gap."

The investor also argued that India could benefit from being a later entrant in the AI race. "Regarding AI supply side, Sarvam etc just received more investment, and we are continuing to work on the semiconductor side," he said. "Second/third mover advantage on the cheap is not a small thing here."

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Madhusudan said the economics of artificial intelligence had also changed because of rising infrastructure costs. "AI has in part negated the platform winner-takes-all economics of US Big Tech by making it capex-intensive," he wrote, while adding that national security concerns still remained.

The fund manager also suggested that the rupee had become excessively weak relative to fundamentals. "The rupee is extremely oversold," he wrote, adding that recent restrictions on gold and silver imports had only recently started taking effect. "Ex-gold we have been in significant trade and current account surplus for many years."

Madhusudan pointed to rising US bond yields and borrowing costs as signs that the current pace of AI-driven spending in the United States may not be sustainable indefinitely. "US 10y is now 4.6%. Gas and mortgage rates are off the charts there. Rising long-end of the yield curve and rapidly rising AI capex theme both cannot go on together for much longer," he stated.

Despite global uncertainty, he maintained a bullish long-term outlook on India. "We have to be patient: my view remains India is by far the world's greatest investment opportunity amongst the major themes available today," he said.

In another post on Tuesday, Madhusudan challenged the narrative that India’s private sector investment cycle remained weak. "Our narrative of 'no private capex increase' is outdated," he said. He shared a chart showing that annual gross capital expenditure by BSE- and NSE-listed companies had risen to around ₹19.68 lakh crore, or about $205 billion, in FY26 from roughly ₹9 lakh crore, or $94 billion, in FY20-21.