He sees scope for recovery in financials, supported by stable loan growth and earnings that are largely in line with expectations.
Watch the full conversation here or scroll for edited excerpts.
These are edited excerpts from the interview.Q: Do the developments over the weekend change your view on the market? Is it time to lighten up? US markets are back at highs, with Indian markets rallying 9–10% in April.A: I think barring a few hiccups, this week could put the Iran war and the Strait of Hormuz closing in the back picture. We are still hopeful something will come out. It seems like US President Donald Trump is sending delegates, and maybe Vice President JD Vance will be in Pakistan. So, we are hopeful there will be some kind of closure, especially from a Strait of Hormuz perspective.
Q: Typically, before very senior officials travel, some agreement is already in place. Do you think that’s the case here, or will this start from scratch?
A: I sense that the back channels have already been working. They had some sort of agreement on uranium. Maybe there were a few points of disagreement on how much enrichment will continue going forward.
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CLSA turns bullish on India after long bearish phaseBut I sense that they can come closer this time. Barring a ship being seized by the US over the weekend and firing on the Strait of Hormuz by Iran, I think we are moving on. The markets have clearly priced in over the last week that we are possibly towards the end of at least the blockade in the Strait of Hormuz.
Q: The last time we spoke, you mentioned selectively adding financials. After recent results, what is the top theme you’re tracking in Indian markets? Also, with crude moving from sub-$75 to around $95 per barrel, how big a headwind is that? Can India manage at these levels?
A: I think we can still manage if crude stays around these levels. There have been issues in the Middle East, and some of that capacity will take time to ramp up.
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The base case for financials may be impacted in the near term through inflation due to pricing increases. But over the longer term, if Iran supply comes back and Middle East producers increase output, it’s very hard to be bearish on India over the next 12 to 18 months.
Indian financials have taken the brunt early on, but there has been some recovery. The March numbers from HDFC Bank and ICICI Bank are largely in line with expectations. If loan growth sustains at current levels, there is still some room for recovery in these stocks over the year. From there, we will see how the year progresses.
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