‘Study Japan, dancing to FII masters never…’: Zoho’s Sridhar Vembu responds to Nithin Kamath

Zoho founder Sridhar Vembu on Thursday rejected the concerns raised by Zerodha CEO Nithin Kamath on declining foreign investor interest in India, urging a shift in focus away from foreign capital.

Responding to Kamath’s remarks, Vembu suggested reliance on foreign institutional investors (FIIs) was misplaced. “FII is by nature fickle. Mostly, it promotes the ‘casino’ mindset. We also start dancing to FII masters. Never good,” he wrote.

He argued that economic growth should not depend on financial inflows. “We cannot financialize our way to prosperity,” he said.

Must Read: ‘Foreign investors losing interest in India’: Zerodha’s Nithin Kamath lists what needs fixing

Vembu pointed to Japan as an example. “Japan did not court FDI or FII during their economic take-off. They instead licensed foreign tech and worked on mastering it and improving on it, and eventually surpassing it,” he said.

“I am sure I would be told I am hopelessly old-fashioned, but I will say “Study Japan”. Even with extremely poor demographics, Japan punches way above its weight in a wide range of crucial technologies,” Zoho’s chief scientist said. 

Earlier in the day, Kamath said foreign investor interest in India had “pretty much died out”. He cited concerns including geopolitical risks, high valuations, lack of “real AI plays”, and currency pressures.

“Interest has pretty much died out. India is seen as geopolitically exposed, especially to an oil shock. There are no real AI plays. Valuations are rich. And the rupee situation doesn’t help,” he added. 

The Zerodha CEO also said investors were shifting to markets such as Japan, Taiwan, Korea, and Europe, and flagged India’s tax structure as a deterrent. “Our LTCG/STCG structure and the increase in STT have made India less attractive compared to other markets that are seeing inflows,” he said. “If we need to attract FPIs back, and we do, fixing this feels like pretty low-hanging fruit.”

The government had raised long-term capital gains tax on equities from 10% to 12.5% in the 2024 Union Budget, a move criticised by market experts, including Sameer Arora and Saurabh Mukherjea.