Why patient capital still sees opportunity in India

When markets turn unsettled, daily price movements can dominate the economic conversation. Foreign selling becomes a verdict on the country, a weaker currency feeds doubts, and individual disappointments become evidence of a wider problem. These signals deserve attention. But judging India’s prospects also requires examining what businesses, borrowers and investors with longer horizons are doing.

Two recent developments provide that perspective. The government has approved a Fairfax subsidiary as strategic buyer for the proposed sale of a 60.72% stake in IDBI Bank for approximately ₹52,878 crore. Separately, Blackstone’s Jon Gray has outlined an ambition to increase the firm's India investments from about $50 billion to $100 billion over five years. These represent substantial confidence in India’s future.

Having worked closely with Prem Watsa and Fairfax, I have seen their willingness to support businesses through difficult periods. Their experience also teaches caution. Transforming a smaller private-sector bank in southern India has required years of investment in technology, diversification and scale. An investment in a leading PVC producer has faced setbacks too. Patient capital needs sound execution, realistic expectations, and a willingness to correct course.

Quick answers to key questions

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QUESTIONS

The proposed ₹52,878 crore purchase of a 60.72% stake signals that a major foreign investor is willing to take a long-term position in India’s banking sector. It also reflects the government’s willingness to give private capital a larger role.

The article points to India’s growth prospects, favourable demographics, rising household investment and stronger corporate and banking balance sheets. These factors may create opportunities when market prices fall more than business fundamentals justify.

Monthly SIP contributions reached a record ₹32,490 crore in September, showing continued participation by domestic savers despite market weakness. These recurring investments deepen markets and broaden the domestic investor base.

Investors should consider valuation, earnings and currency risks, as well as global interest rates. The article also highlights challenges from a deficient monsoon, inflation, expensive oil and India’s need for capital inflows to help finance its current account deficit.

The article argues that removing LTCG tax on genuinely long-term equity investment could attract patient capital, and that extending relief to domestic investors could support household wealth creation. It presents this as a policy view, not a confirmed change.

Portfolio investors deserve a fair hearing. Their selling can reflect concerns about valuations, earnings, currency risk and global interest rates. The extraordinary investment in AI infrastructure is also competing for global capital. This helps explain the environment in which allocations are changing, although it cannot explain every outflow from India. When reallocations depress prices beyond what business fundamentals justify, they create opportunities for discerning long-term investors. Experienced investors are recognizing that possibility.

India offers a compelling foundation. Its growth is faster than that of the other large economies: real GDP expanded 7.8% in April–June, and the IMF projects 7% growth for FY27. Its favourable demographics add depth to the opportunity. A large working-age population can sustain production, consumption and savings for years, provided education, skills and employment keep pace.

Indian households are demonstrating their own confidence. Monthly mutual fund SIP contributions reached a record ₹32,490 crore in September, despite market weakness. These recurring savings reflect a growing willingness to participate in the country’s corporate future. They also deepen markets and provide a broader domestic investor base.

That matters to overseas investors. Confidence to enter a market depends partly on confidence that an orderly exit will be possible. Blackstone's Gray has highlighted the strength of India’s public markets and listing opportunities. Alongside liquidity, India offers a vibrant democracy, an independent judiciary and established legal protections. Faster dispute resolution and more consistent enforcement would make those institutional advantages stronger still.

The financial foundation has improved too. Crisil estimates that median corporate gearing roughly halved over the past decade to around 0.5 times by March 2026. Banks’ gross NPAs stood at 1.68% in June, with a robust capital adequacy of 17.78%. Healthier borrowers and lenders give expansion a firmer foundation. Icra also reports healthy repayment performance in rated secured retail securitization pools, although unsecured segments require scrutiny.

Public investment reinforces this strength. Central government capital expenditure reached approximately ₹5.10 lakh crore during April-August. Better transport, power and digital connectivity generate demand while improving productivity and widening markets for businesses.

There are a few significant challenges. A deficient monsoon threatens farm incomes and food prices. September retail inflation reached 5.54%, while expensive oil affects household budgets and business costs. The Reserve Bank of India’s October rate increase demonstrates vigilance. Policy must provide calibrated support to growth without losing sight of inflation.

Oil dependence also creates a recurring external financing challenge. Services exports and remittances offset much of the merchandise trade deficit, but India generally runs a current account deficit. The gap requires net capital inflows or a drawdown of reserves.

Special FCNR deposit schemes can mobilize foreign currency quickly, while limits on banks’ open forex positions can help manage instability. These measures have their place, but deposits mature and restrictions cannot create a lasting supply of foreign exchange. Sustained equity and debt investment must help finance greater productive capacity and more jobs.

India should, therefore, offer investors a dependable welcome through predictable taxation, timely approvals and straightforward entry and exit. Foreign capital complements domestic savings by expanding financing and sharing risk. Our competition for internationally mobile capital comes from other investment destinations. Attracting it on sensible terms can improve prosperity for Indians.

Tax exemptions for eligible foreign investors in government securities are an encouraging first step. The larger opportunity lies in equities. The finance minister’s openness to hearing investor views on LTCG taxation is welcome.

Removing LTCG tax on genuinely long-term equity investment could attract patient capital. Extending relief to domestic investors would avoid apparent discrimination and support household wealth creation. In my view, the resulting expansion in investment, businesses and taxable economic activity could more than offset the initial revenue loss over time.

Domestic savers and experienced global investors are expressing confidence through their actions. India should build on that confidence with policies that attract durable capital and turn it into productive businesses, better jobs and higher living standards.