Riddhiman Jain, Managing Director (MD) and Head of Investment Strategy and Solutions, Waterfield Advisors, believes artificial intelligence (AI) is a secular, long-term theme, as the scale of transformation across industries suggests it is structural. Jain, however, cautioned that investors should follow a diversified approach given the sharp dispersion in returns and valuations within the AI ecosystem. In an interview with Mint, Jain also discussed the current market structure and investment strategies for gold, silver, and equities. Edited excerpts:
The domestic market is struggling to sustain gains. What triggers can unleash the bulls?
The domestic market’s recent struggle to sustain gains has largely stemmed from a lack of fundamental fuel, but Q3FY26 can be a decisive turning point.
After a period of muted performance, corporate India is witnessing a broad-based earnings recovery that could serve as the long-awaited trigger for the bulls.
This fundamental revival arrives at a critical juncture, coinciding with a shift in liquidity dynamics. February has witnessed the return of positive Foreign Institutional Investor (FII) flows, a catalyst that had been absent in recent months.
The confluence of this renewed foreign interest and the structural earnings upturn can create a formidable “double engine” for the bulls, potentially providing the depth and stability required for the market to sustain its upward trajectory.
Why have the US-India trade deal, the India-EU trade deal and the Union Budget 2026 failed to trigger a sharp rally in the market?
Despite optimism surrounding the US-India and India-EU trade deals and the Union Budget 2026, the market failed to rally due to immediate fiscal and structural headwinds introduced in the Union Budget 2026-27.
The budget’s decision to hike the Securities Transaction Tax (STT) for the third time since 2023 acted as a major sentiment dampener, directly impacting liquidity and high-frequency trading.
Furthermore, the government’s gross borrowing target of INR 17.2 lakh crore exceeded market expectations, placing upward pressure on bond yields and tightening liquidity.
Additionally, the budget’s focus on fiscal consolidation over aggressive stimulus left the market without a short-term growth catalyst.
While the US trade deal reduced tariffs, it came with the strategic cost of stopping discounted Russian crude imports, negatively affecting heavyweights like Reliance and OMCs due to rising input costs.
Additionally, the trade deal’s benefits are concentrated in specific sectors like textiles, chemicals, and auto ancillaries, which have a relatively low weightage in the benchmark indices.
The India-EU FTA is viewed as a long-term structural recalibration rather than an immediate earnings trigger, with benefits playing out over years rather than quarters.
What is your take on the Q3 earnings? Is the worst in terms of corporate earnings behind?
Based on the Q3FY26 data, the worst in terms of corporate earnings appears to be firmly behind us, signalling a structural turnaround for the markets.
The recovery is evident in the sequential momentum for companies with a market cap greater than 5,000 crores reveals a clear sequential uptrend: median sales growth has accelerated from nearly 9-9.5% in Q1FY26 to nearly 11-12% in Q3FY26.
More encouragingly, operational efficiency and profitability are outpacing revenue; median Operating Profit growth climbed to nearly 15-16% % this quarter (up from nearly 10-11% in Q1), while median PAT growth surged to a robust nearly 17-18% compared to nearly 12-13% just two quarters ago.
The recovery isn’t limited to the largest firms; mid-cap and small-cap segments are outperforming large caps in profitability, delivering median PAT growth of nearly 18-20% each.
This broad participation is a classic signal of a healthy, sustainable earnings cycle. The Q3 earnings recovery provides a strong fundamental floor for the market.
Coupled with corrected valuations and the return of positive FII flows in February, this structural improvement creates a powerful setup for the markets.
Gold has outperformed Nifty over the past 20 years. Why should investors not increase exposure to gold?
While gold’s recent outperformance against the Nifty might tempt investors to overhaul their asset allocation, this trend is largely a function of currency depreciation and periodic global uncertainty rather than structural economic growth.
A significant portion of gold’s rupee returns stems from the weakening of the domestic currency against the dollar, making it an effective hedge rather than a compounding growth engine.
In contrast, equities represent ownership in businesses that generate cash flows, reinvest profits, and directly benefit from India’s expanding economy.
Gold typically endures long periods of price stagnation during economic upcycles, whereas equities tend to capture the wealth creation of a developing nation.
Therefore, investors should view gold as a strategic diversifier to dampen volatility, while retaining equities as the primary vehicle for long-term capital appreciation.
Apart from equities and gold, which other asset classes should retail investors consider?
Retail investors should broaden their horizon to include REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts), which have emerged as powerful asset classes in recent years.
These instruments offer the dual benefit of capital appreciation and regular income through stable cash flow distributions.
Additionally, a global allocation remains vital for geographical diversification and as a hedge against rupee depreciation.
A combined allocation of around 20–30% to these buckets can help generate steady income, enhance portfolio stability, and improve risk-adjusted returns over the long term.
For HNIs and Ultra-HNIs, we are also recommending measured allocations to performing credit and private equity.
However, investors should exercise caution, as the dispersion in returns across managers and funds is significant.
Manager selection becomes critical in these segments.
We therefore recommend accessing these opportunities through a fund-of-funds structure, which provides built-in diversification, institutional-quality manager selection, and access to otherwise difficult-to-access opportunities, while helping mitigate concentration and execution risk.
Do you believe AI and data centres are strong themes for the long term? How can Indian investors invest in global AI stocks?
Yes, artificial intelligence is clearly a secular, long-term theme. The scale of transformation we are witnessing across industries — from productivity enhancement to automation and data-led decision-making — suggests this is not cyclical but structural.
However, from an Indian-listed equity perspective, pure-play AI opportunities remain limited, as most foundational innovation has occurred outside India, particularly in the US.
That said, Indian IT services companies are taking meaningful strides in helping global enterprises deploy AI, optimise workflows, and unlock productivity gains.
So, investors can participate indirectly through high-quality IT services names.
Data centres are another compelling long-term theme. As AI adoption accelerates, compute demand, storage requirements, and cloud infrastructure needs are rising structurally.
While listed opportunities in India remain limited, significant activity is underway in the unlisted and private markets, particularly in hyperscale and digital infrastructure.
For Indian investors looking to access global AI leaders, access has become much easier. Investors can invest through international brokerage platforms that allow direct overseas equity exposure. Additionally, GIFT City-based investment platforms and structures now provide regulated and tax-efficient access to global equities.
As always, given the sharp dispersion in returns and valuations within the AI ecosystem, a diversified approach, either through global ETFs or professionally managed funds, may be more prudent than concentrated stock picking.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of the expert, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
