Dollar slide may continue, driving foreign inflows into India: Mark Matthews

While the outlook for Indian equities is currently clouded by weak earnings projections, high valuations, and global uncertainties, Mark Matthews, Head of Research Asia at Julius Baer, believes there is no reason to worry. Speaking to CNBC-TV18, Matthews said that India’s growth outlook remains positive and supportive of further foreign fund inflows.A key factor supporting India’s appeal, according to Matthews, is the expected further weakening of the US dollar, which would be a major positive for emerging markets. “The main thing is that the dollar is still overvalued, and our view is it will weaken over the next 12 months, probably about 10 to 15% overvalued based on our real effective exchange rate model,” he said.

The dollar has shed over 8% against a basket of other big currencies so far this year.

He also pointed out that the factors behind last year’s slowdown have largely faded, inflation is under control, and at least two more rate cuts are likely, creating a favourable environment for equities. “The market is always looking forward. So it’s true that there has been some economic weakness, but if we look forward, I think we will see acceleration,” Matthews said.

A potential cyclical recession in the US may also work in India’s favour, he noted. Unlike deep structural downturns like the 2008 global financial crisis, a mild US slowdown would prompt global investors to look elsewhere for returns.
“India’s economy among the major emerging markets is about as decoupled from the US as you can get,” highlighting that domestic consumption is India’s main growth driver, not its ties to the US economy.

Also Read: Why the US market could correct 20% in 2025: Mark Matthews of Bank Julius Baer explains

On the global stage, Matthews dismissed the public contradictions between the US and China on trade talks as political theatre. Despite China claiming no talks are underway and the US insisting dialogue is happening, he said, “Behind the scenes, there is no doubt that they are talking.”

The recent gains in Asian markets, he explained, are largely driven by this change in narrative—from escalation to de-escalation.

Also Read: India may extend gains over China, but global risks remain high: Geoffrey Dennis

For the entire interview, watch the accompanying video

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