Crude at $125, FIIs selling $20 billion, and yet Alchemy Capital's Alok Agarwal says India is a buy

Alok Agarwal, Head of Quant and Fund Manager at Alchemy Capital Management, argues that India's underperformance over the past year has already priced in most of the bad news — and that the risk-reward is now firmly in favour of long-term investors.

With Brent crude hitting $125 and foreign institutional investors having offloaded over $20 billion worth of Indian equities this year alone, the mood on Dalal Street is cautious. But Agarwal sees the pessimism itself as the opportunity — and has a clear playbook for where to deploy capital right now.

Most of the bad news is already in the price

Agarwal's central argument is one of relative positioning. Over the past year, MSCI India has underperformed the broader emerging market index by more than 50 percentage points — a staggering gap that he believes already reflects the crude shock, the weak rupee, and FII selling pressure. India is currently the biggest underweight for FIIs in emerging market funds, meaning institutional money has already repositioned for the worst.


"The moment we start seeing some de-escalation, the moment the Strait of Hormuz reopens and crude falls sharply, India will suddenly appear quite-quite attractive, says Agarwal.

He acknowledges the near-term risk is real. Retail fuel prices in India have not yet been raised despite crude jumping from under $70 to $125. Once that pass-through happens, inflation will tick up and corporate margins will face pressure. FY27 earnings estimates have already seen a roughly 1% consensus downgrade in the past month — and more could follow. But Agarwal insists the downside from here is limited, and any further dip presents a buying opportunity rather than a warning signal.

Four sectors with the longest runway

Agarwal's portfolio strategy follows what he calls the "path of least resistance" — maximum tailwinds, minimum headwinds, and low exposure to crude-linked cost pressures. His four preferred sectors right now are metals and mining, capital markets, power infrastructure, and defence.

Sector 1
Metals & Mining
Structural growth play

Sector 2
Capital Markets
Domestic-driven growth

Sector 3
Power Infrastructure
Data centres + heatwave demand

Sector 4
Defence
Long order book runway

On power, his conviction goes beyond the obvious generation plays. India is participating in the global AI boom primarily through data centres, with hyperscalers committing large capital and the government backing the trend with a 10-year tax holiday. All of this creates enormous and sustained electricity demand. Within the power value chain, Agarwal prefers equipment makers and transmission players, transformers, HVDC line suppliers, over power financiers, which he avoids due to difficulty in assessing credit costs.

Banks: PSU and smaller private lenders over large private banks

On the lending side, Agarwal sees a Goldilocks setup quietly forming. Credit growth is running above 15%, the highest in over a year. Deposit growth has recovered to 13–14%. Credit costs remain low. Large private banks have underperformed partly due to heavy FII selling, creating a better risk-reward entry point, but his preference within the sector sits firmly with PSU banks and smaller private lenders rather than the index-heavy large private names.

Index heavyweights with low earnings growth visibility are the ones Agarwal is deliberately avoiding, a pointed warning for passive investors sitting heavily in large-cap funds.

The overall message from Alchemy Capital is clear: the noise is loudest right now, but the signal points to accumulation. Patient investors who can look past the crude overhang may find that today's uncertainty is tomorrow's entry point.