FIIs Underweight India, Awaiting Correction; Iran Conflict, AI Worries Add Caution: Kotak

• Foreign Institutional Investors (FIIs) remain "underweight" on India, seeking a deeper market correction or fresh emerging market fund inflows.
• The Iran conflict has heightened caution among foreign investors due to India's vulnerability to oil and gas supply disruptions.
• Global investors express significant concerns over AI's disruptive impact on Indian IT services, fearing job losses and reduced outsourcing demand.
• Domestic funds, particularly PMS managers, are increasingly wary of illiquid small and mid-cap positions, citing stretched valuations.
• Kotak Institutional Equities anticipates only modest near-term gains for the Nifty due to elevated valuations compared to MSCI emerging markets.