Overall, the house view anticipates that the cycle of earnings downgrades will continue, and their targets for Asia ex-Japan, China, and India already incorporate these adjustments.
While India’s macroeconomic fundamentals remain strong, geopolitical tensions, particularly with the US, continue to weigh on investor sentiment and foreign fund flows.Seth explained, “If these US-India tensions continue, it will remain an overhang on the market.”
While a thaw in diplomatic relations would be unequivocally positive, Seth cautioned against expecting a sudden “gush of liquidity” into India.
Read Here | There’s a 30% chance of US recession: S&P GlobalAnother structural challenge for India is the lack of direct investment options to play the global AI theme, which is a major driver of capital flows into other Asian tech hubs.
Foreign institutional investors have maintained a cautious stance, with outflows likely to continue in a “drip-drip” manner as other Asian markets, including Korea, Taiwan, and China, benefit from artificial intelligence (AI)-related momentum.
On the subject of valuations, he noted that they are on the high side across Asia’s four largest markets, including India. He stressed that rich valuations can persist as long as positive developments continue.
A key issue for India is that despite its relative underperformance recently, the market has not seen a significant price correction. “If I look at Nifty and Sensex from the high point of September 24, we are just down 5%,” he pointed out, suggesting this makes the market less compelling on an absolute basis.
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