FIIs may return to India as earnings visibility improves: Abakkus MF CEO Vaibhav Chugh

Foreign investors could return to Indian equities as earnings growth becomes more broad-based and valuations turn more attractive relative to other global markets, even as domestic institutional investors continue to provide a strong cushion against foreign outflows, according to Vaibhav Chugh, CEO of Abakkus Mutual Fund.

“I think it is high time for them (FIIs) to come back,” Chugh told Fortune India. He said India has moved from being one of the most expensive major markets with limited earnings visibility to a market where earnings prospects have improved, creating a stronger investment case for global investors.

“If you look at the numbers, price-to-earnings (P/E) ratios are around 20-23 times, while earnings visibility has improved. We were once the best-performing major market with little earnings visibility; today, we are among the least-performing markets, but earnings visibility has gone up,” Chugh said.

He said the recent outperformance of markets such as South Korea and Taiwan demonstrates how quickly global capital can move towards markets where investors see a clear earnings-growth opportunity.

“We have seen South Korea, Taiwan, all of them running because there was a clear case of high growth in certain sectors. Today, there is a high-growth scenario in India,” he said. “Once it becomes more broad-based, I think there is no reason why FIIs will not look at India.”

He expects foreign investors to increasingly focus on earnings rather than short-term market narratives. “I don’t think they look at narratives. They look at numbers, and numbers are quite conducive for India to become very, very attractive for them,” Chugh said.

Domestic flows to remain structurally resilient

While FIIs have remained cautious, domestic institutional flows, supported by strong systematic investment plan (SIP) participation, have emerged as a structural source of liquidity for Indian equities.

So far in 2026, FIIs have been net sellers of equities worth ₹3.49 lakh crore, with gross purchases of ₹24.52 lakh crore against sales of ₹28.01 lakh crore. In contrast, DIIs have remained consistent buyers, recording net purchases of ₹5.40 lakh crore, with gross purchases of ₹29.48 lakh crore against sales of ₹24.09 lakh crore.

Chugh said India now has around 6.3 crore mutual fund investors and argued that the mutual fund industry has become an important vehicle for households looking to build wealth and achieve long-term financial security.

“For a country like India, which is full of aspirations, mutual funds remain a very, very important and integral tool for people to slowly build wealth for their future goals,” he said.

He expects SIP flows to remain structurally resilient despite periodic market volatility. “There might be swings, but I think that is very, very temporary,” Chugh said, adding that rising per-capita income and increasing financialisation of household savings should continue to support flows.

“People don’t talk about what mutual funds are anymore. They understand SIPs, investing and wealth creation,” he said. “That concept is very, very clear in the mind of people today.”

Stock-level opportunities despite elevated valuations

Chugh said Abakkus remains constructive on Indian equities despite elevated index valuations, as it continues to find opportunities at the stock level based on earnings growth, cash flows and return ratios.

“Our style of investment is very, very bottom-up stock picking. We are very much both value-oriented and growth-oriented,” he said.

The fund house is positive on capital markets, private banks, EMS, EPC, pharmaceuticals, specialty chemicals and capital goods.

However, it remains cautious on large-cap IT despite the recent rebound, citing stretched valuations relative to earnings growth, while remaining overweight on select small-cap IT companies benefiting from AI-led demand.

“You can’t look at IT as one basket. There is a different way to look at it,” Chugh said.

Within consumption, Abakkus prefers discretionary over staples, with food inflation and weather-related risks likely to constrain the latter. “As a theme, we are positive on consumers, but within consumers we are most positive on discretionary,” he said.

Abakkus crosses ₹10,000 crore AUM

At the company level, Abakkus Mutual Fund’s assets under management crossed the ₹10,000-crore mark within eight months of launching its first scheme in December 2025.

Chugh attributed the rapid growth to the track record of founder and CIO Sunil Singhania, the broader investment team and an aggressive distribution build-out.

“The kind of receptance we have got has really encouraged us that we can really do well in the coming time,” he said. “All these numbers also come with a lot of responsibility on our shoulders.”

He said the fund house has more than 13,000 distribution partners, of which over 5,000 are active, and has expanded its presence to 22 locations across the country.

The bulk of the AUM growth has been organic, with around ₹800 crore coming from net inflows and the balance largely reflecting market appreciation, according to Chugh.

“We actually have to put a lot of effort to ensure that no stone is left unturned and we do whatever best we can in terms of managing the risk,” he said.

Product expansion and path to profitability

Abakkus Mutual Fund is focused on expanding its product suite rather than setting a specific three-to-five-year AUM target, with Chugh saying the priority over the next 18-24 months is to complete planned launches.

The fund house, which currently has four mutual fund schemes, three PMS strategies and two open-ended AIFs, has applied for a SIF and plans to launch four to five more mutual fund schemes over the next year across categories such as hybrid, arbitrage, balanced advantage, multi-asset allocation and mid-cap.

Despite the expansion, Abakkus is maintaining an asset-light, milestone-based model, operating from co-working spaces and keeping its sales team lean at around 45 people.

Chugh expects the business to reach operational break-even within its first year. “My sense is that within the first year, we will touch our operational break-even. There is not even a doubt on that,” he said.