Asia tech selloff is a buying opportunity, says Manishi Raychaudhuri; But India has a problem to solve first

Asian markets were red-hot this week, and the pain was sharp where the biggest gains were made. Korean and Taiwanese tech giants, Asia’s semiconductors and the engines of the AI ​​rally took the hardest hit. But veteran investor Manishi Raichoudhary is not panicking. In fact, he sees an opportunity.

“I would consider this correction as a buying opportunity,” Raichoudhary told ET Now.

Why did Asian tech stocks sell off?

Three things converged in a single weekend and triggered the rout, and Raichoudhury explains each one succinctly.

First, Broadcom’s chip revenue guidance, while objectively strong at about $16 billion with 200% growth, was marginally reduced by prices already priced into inflationary markets. Second, a stronger-than-expected US non-farm payrolls report raised fears of a rate hike ahead of the next Fed meeting. Third, renewed military tensions between Israel and Iran sent oil prices soaring again, adding another layer of macro concern.

Put these together and the result is a classic risk-off move; Investors book profits in certain stocks where they have earned the most. Hence, the tech-heavy Korean and Taiwanese markets were hit hard.

But here’s what hasn’t changed: Demand for AI capital spending remains intact. Semiconductor and memory prices show no signs of coming under sustained pressure. Earnings estimates for Asia’s chip sector are still pointing strongly upwards. In Raichoudhary’s assessment, the fundamentals have not changed, only the emotions have, temporarily.

India’s big problem: Earnings growth is falling, not rising

While North Asia’s correction looks like a reduction in buying, India’s situation is structurally more complex and Raichowdhury is bullish about it.

The Nifty and Sensex are currently trading at 19 to 20 times one-year forward earnings, a premium of around 30% over Asia’s ex-Japan markets. In specific terms, that premium has now fallen to its long-term historical average, reaching an extraordinary 87% in Asia over India’s September 2024 high.

But historical valuation parity alone will not bring back foreign institutional investors, he argues. The real problem is earnings. India’s corporate earnings growth for FY27 is now projected at just 9% to 9.3%, a single-digit number that Raichowdhury calls “pedestrian”. Crucially, the same estimate was 16% just nine months ago. Analysts have been consistently downgrading it, the exact opposite of what is happening in China, Taiwan and Korea, where earnings estimates are being revised upwards.

For FII flows to return meaningfully, Raichowdhury says two things need to happen: Earnings growth must return to double digits, and markets must gain confidence that those estimates will sustain rather than continue to decline.

Adding to the challenge is a weak domestic consumption environment, which he describes as a “dysfunctional and uninspiring” employment situation. The earnings growth premium that India once reliably commanded over Asian peers can no longer be taken for granted.

One Indian condition that he still supports: private sector banks

Despite the macro headwinds, Raichoudhary remains bullish on one corner of the Indian market — large private sector banks — though with a clear time horizon attached.

His logic is straightforward. Any meaningful economic growth in India, whether driven by consumption or investment, has to be financed by banks. Within banking, private sector players account for only 30-35% market share but are steadily gaining ground on public sector rivals through superior technology and customer acquisition. HDFC Bank, once trading at four times price-to-book, now trades at around two times – a more reasonable entry point.

The near-term risk is real: banks account for roughly 30% of the Indian market, which means they absorb a disproportionate share of any FII sales. But for investors looking three to five years out, Raichoudhary is positive.

India’s story is not broken. It needs better numbers to tell.