Paroda also sees a potential shift in global investor flows over the next 18–24 months as mega artificial intelligence (AI) related initial public offerings (IPOs) in the US absorb capital and prompt investors to look beyond crowded technology trades. With Indian markets having underperformed recently and the rupee weakening sharply, he believes India could attract renewed interest as investors search for opportunities outside the dominant AI theme.
This is an edited transcript of the interview.Q: In two days, exactly on May 28, it will be three months since the conflict in West Asia began. Now there is this whole Abraham Accord conversation as well. Your views and implications for markets and investments?A: It seems like it’s two steps forward, one step backwards. The good news is that it looks like the Iranians were in Doha and were talking, and their central bank governor was there as well. So, it seems like at least there is some finality or some conclusion coming to the process.
President Trump also tweeted that he’s open to the Atomic Energy Commission overseeing their nuclear enrichment, so it looks like both sides are moving towards some sort of conclusion.
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From India’s perspective, we just need the Strait of Hormuz to remain open. Some of these issues may take longer to resolve, but if the Strait of Hormuz stays open, we will continue getting oil and LNG supplies, and that will be a sign of relief for everyone here.
Q: Ships are still passing through, and there seems to be a stealth normalisation already underway. What will it take for market sentiment to turn more positive as the situation normalises?
A: I think people will wait for more commentary as the situation normalises. Once there is some sort of finality between the US and Iran, many investors who have pencilled in inflation pressures for the back half of the year may start revising those assumptions.
If those pressures ease and rate hikes are avoided, it would provide relief to a large part of the benchmark indices, especially financial services and banking. That could fuel some stabilisation and a rally across the Indian market.
Q: Indian markets have underperformed, and the rupee has also weakened sharply. Do you think India could start attracting flows again, especially if lower crude prices improve the fiscal situation?
A: Yes. One thing we should look at is that even the US market has been very narrow, with AI stocks leading the pack. But there is a lot of supply coming in. You could see SpaceX IPOing, there are talks of OpenAI IPOing, and these are mega-cap companies with valuations above $1 trillion.
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As this new supply comes in, we think a lot of the AI stocks may take a breather as investors digest these developments. That could prompt investors to look for opportunities that have not really participated over the last 18 months, and India definitely comes into the picture.
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