Prashant Jain says FPI selling is opportunity, not risk

Jain noted that large-cap valuations have already adjusted

Foreign investors selling Indian equities isn’t a risk—it’s a buying opportunity, said market veteran Prashant Jain, the celebrated ex-CIO of HDFC Mutual Fund and Founder of 3P Investment Managers in an exclusive interview with N Mahalakshmi on The Wealth Formula. Watch full interview here.

According to him, if business fundamentals remain strong and valuations are reasonable, selling pressure doesn’t determine the long-term trajectory of stock prices.

“I would look upon every phase when foreigners are selling as an opportunity for someone who has periodic cash flows or surplus capital to deploy,” Jain said. He argued that once foreign investors stop selling and start buying again, prices rebound, making the window to accumulate stocks short-lived.

On being asked if the current valuations could be at risk given the presence of foreign investors, who still hold a 17% stake in the market, Jain said, their continued selling can create distortions. “Of course, multiples can come down temporarily, there is no doubt about that. But that again is not a risk to my mind,” he said. He believes that a price-to-earnings multiple of 17 times for an earnings growth rate of 10–12% is reasonable given India’s cost of capital.

Looking ahead, Jain expects Nifty to compound in the low double digits over the next three to five years, with earnings largely resilient. He said a meaningful derating in Nifty is unlikely, even in sectors like consumer staples and automobiles. While some multiple compression is possible, he believes it won’t be significant. “Automobile companies trade at about 20x earnings, while staple companies are around 40x. Maybe they can still derate, but it should not be a massive derating,” he said, citing strong market structures, robust cash flows, and high dividend payout ratios.

He noted that large-cap valuations have already adjusted, with expectations reset to a more realistic earnings growth of around 10–12%. Meanwhile, India’s cost of capital has declined, improving the attractiveness of equities relative to bonds. “If you look at the gap between earnings yield and bond yields in India today, it is reasonably attractive, I would say, quite attractive,” Jain said.

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