Why Asia's richest banker Uday Kotak is not happy with 'investors from Lucknow to Coimbatore' putting money in stocks

Veteran banker Uday Kotak while commenting on high stock valuations in India questioned whether retail investors should keep on buying as they are funnelling money into equities daily, contributing to domestic institutional flows.

"Should we continue encouraging retail investors to keep buying? Retail investors in India are funnelling money into equities daily, contributing to domestic institutional flows. Money from individuals from Lucknow to Coimbatore is flowing to Boston and Tokyo," he said, noting that foreign companies were taking advantage of high valuations to book profits and repatriate funds.

"The US dollar is acting like a vacuum pump, sucking capital out of emerging markets," Kotak said. Indian stock valuations remain significantly higher than those in most other global markets.


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A greater participation of mutual funds, insurance firms and retail investors in the Indian stock market has made India one of the top five markets globally despite waning ownership of foreigners. Inflows into recurring plans offered by mutual funds emerged as key support for the market.

The sustained weakness in Indian equities will test their resilience over the next few months, reported Bloomberg quoting to analysts at Citigroup Inc.

The benchmark NSE Nifty 50 Index has fallen more than 11% from its September peak, with weak corporate results and expectations of a rotation toward China after Trump’s softer tariff approach dashing hopes of a near-term revival. Indian shares still remain the world’s most expensive just behind the US, trading at close to 19 times forward earnings. That may not dissuade local investors from amping up their bets on Indian equities, according to Kotak Institutional Equities.

The Congress on Thursday stressed the need for professional regulation of financial markets with a "total overhaul" of SEBI and called for a relentless focus on global manufacturing ecosystems across the technology spectrum to carve out niches for India. Congress general secretary in-charge communications Jairam Ramesh shared a media report on X which quoted founder and director, Kotak Mahindra Bank, Uday Kotak, as saying that over-financialisation can hurt the Indian economy as investors move their savings into equities without understanding valuations.

He made the remarks while expressing concern on over-financialisation.

"India's stock market capitalization currently stands at approximately 140 percent of its GDP. On September 2nd, 2024, the Chief Economic Adviser in the Ministry of Finance had warned that the growing profitability of the financial sector and high levels of market capitalization require closer scrutiny," Ramesh said on X.