Next multi-baggers will come not from momentum or leverage, but from patient compounding in businesses that scale with India’s domestic demand, Siddharth Mehta, founder & chief allocator (CIO) of Bay Capital, tells Nesil Staney wflw interview. He also speaks about regulatory reforms, FPI stance on India,fund flows, and emerging themes in Indian markets. Excerpts:
Is financial netting needed in Indian markets?
Absolutely.Allowing financial nettingfor FPIs is a natural next step in the maturation of Indian markets. It would enhance efficiency, reduce transaction costs, and improve liquidity—all of which ultimately deepen participation.As India integrates further with global capital markets, regulatory frameworks must evolve to reflect the sophistication of our investor base. FPIs, at present, are long-term allocators of capital, not just traders. By facilitating netting and risk management mechanisms, India signals confidence in its institutional framework and encourages more stable foreign participation.
Beyond currency value, what drives FPI flows? How docs India compare now to other EMs?
Beyond currency, capital flows are driven by growth differentials, governance quality, policy stability, and institutional credibility. On all these fronts, India stands out. Our risk-reward profile -strong nominal GDP growth, fiscal prudence,a deepening domestic investor base, and credible monetary policy -now is among the most attractive globally. Many emerging markets are dependent on commodities or cheap exports, India’s growth is broad-based and consumption-led,giving it structural resilience. FPIs see India not as a tactical EM overweight, but as a core, strategic allocation — a place where capital compounds sustainably overtime.
FPIs sold $ 18 billion and invested $5 billion in IPOs this year. How do you see this trend in 2026?
This dichotomy reflects a rotation, ratherthan a retreat. FPIs are exiting crowded, fully-valued segments of the secondary market and reallocating into new-age, primary market opportunities where India’s structural story is still unfolding. It also signals growing confidence in India’s entrepreneurial ecosystem — investors are backing founders and sectors that represent the next decade of growth. By 2026,as rates stabilise globally and earnings visibility improves, we expect FPI flows to broaden — not just into IPOs,but into quality listed businesses as well.
What are the emerging themes in the Indian economy, and how will Bay Capital capture them?
India is in the midst of a once-in-a-century formalisation of its economy a generational shift driven by digital infrastructure, aspirational consumption, and the rise of domestic manufacturing. We’re most excited about digitisation of services, premiumisation and brand India,financialisation of savings and growth of domestic manufacturing. Bay Capital is positioned across these themes through longterm holdings in consumer, financial services,technology-enabled, and domestic manufacturing leaders that reflect the new India in motion.
How are regulatory and structural reforms influencing your investment strategy?
Reforms are not noise for us — they arc the foundation of our investment thesis. Over the past decade, measures such as GST,IBC,RERA,and digital public infrastructure (UPI,Aadhaar,ONDC) have created a cleaner, more transparent economy. We invest ahead of reform cycles — identifying the sectors and business models that will gain disproportionate advantage once the system resets. For example, financial inclusion reforms created opportunities in fintech; infrastructure reforms unlocked logistics and manufacturing efficiency; and governance reforms elevated the quality of corporate India.
How arc current valuations; what are your top sector picks; and where would investors find multi-baggers at this level?
Valuations are mixed — headline indices look fair to rich, but dispersion beneath the surface is significant. Large-caps are priced for stability, mid-caps for growth, and small-caps often for dreams. We see real opportunity where earnings visibility and capital discipline coexist — particularly in consumer brands, niche manufacturing, and financial services that serve India’s expanding middle class.
In unlisted markets,quality private firms are commanding high valuations, but we still find selective opportunities in founder-led,capital-efficient platforms that are profitable or close to breakeven.