The last time you were in India in 2022, you said that the spotlight may come on India as never before. Does that assessment stay?
When you start to look past the US today, there’s a good argument that the most interesting market is India. Now the question will be the extent of the opportunity and the durability. If supportive policies continue and if corporates can grow their investments, this could be a fundamentally game-changing cycle. TBD (to be decided) …. TBD …. But there’s still reason for optimism, and it’s partly the momentum, it’s partly the scale of the economy and the scale of the potential.
What are global asset allocators saying about India now?
In the world today, there’s a handful of really interesting stories. India is definitely in the handful. It may be number one for very different reasons. Japan can be in the discussion. And the Persian Gulf can be in the discussion. When you get past these, you start to get to much smaller markets in South East Asia.
But foreign investors sold Indian stocks worth $11 billion in October, which is the highest ever in a month. What explains this panic?
Panic is a strong word. Markets have pauses that refresh. And at this point, there’s no reason to feel that whatever’s happened in the short period is anything other than a healthy step in the process. I have this phrase I use a lot inside our organisation, it’s early to panic. While it’s good to be awake and aware, never panic early.
Everybody is watching the US Presidential elections. What’s at stake for investors?
Particularly assuming a clear and relatively quick outcome, markets seem to be sanguine about whatever the outcome is. There’s no clarity on which candidate will win. But if you look at the market’s activity for the last several months as this has played out, the market seems to be close to indifferent as to which one of them serves as President.How would the markets react to the outcome?
There’s a general view that the Republican Party is more business-friendly. However, we’ve just successively had a Republican President, Trump, and a Democratic President, Biden. The economy and the markets performed well under each of them. And each had meaningful legislative acts that were economically effective. It really is a close call overall, which is why I think in the end, the market has been fairly sanguine going into this election.
Is it fair to say the market is complacent before the election results?
Clearly, the market is somewhere between somewhat and fully complacent. It’s difficult to judge whether that’s fair or not.
The other big event this week is the US Fed meeting. Do you think the Fed has enough room to cut interest rates?
Clearly, the bias right now would be to some moderate amount of rate reduction. The most recent labour numbers would support a bit of easing. As a general matter, inflation is not an overriding concern. And in fact, one could argue that deflation could become a concern. Any delay in determining a winner in the US elections could also be a factor in the Fed’s decision. So I think some variables are still up in the air. But there are arguments for some easing.
What are the big risks that investors must be cognizant of?
I would give you two risks. One is geopolitical. The cooperation among Iran, China, Russia, and arguably North Korea, would seem to be at an unprecedented level. The second risk that could loom in the background is deflation. We seemingly have come out of that inflation, and deflation could be a problem.