He observed that while concerns around valuations had kept investors cautious, normalisation alongside India’s entrepreneurial culture and robust growth potential makes the market increasingly attractive.
These are the verbatim excerpts of the interview.Q: What has been the feedback so far, and what is the one question you are getting most from investors, and if you are getting some questions from corporates, who are there as well?
Agarwal: We have got off to a great start. We have almost 270 odd investors at the conference, and about 120 companies presenting a weight variety of topics, ranging from capex to AI to consumption, everything. The one question which is definitely on the top of every single investor is, when will the capex cycle from the private side revive, and what will be the impact on consumption from the GST cuts that the government has announced.
Indian markets have been sideways for the last 12 months, since our previous conference. Relative valuations for India have corrected meaningfully, so every single investor is looking for when India starts to participate or drive the emerging market (EM) rally that we have been seeing in some of the other emerging markets.
Read Here | Chris Wood expects nominal GDP pick-up to drive Indian stock market rally next year
Q: Peter, just give us the global perspective. Where are we purely valuation wise? Nominal GDP growth has to pick up and hopefully with these three things, two tax cut and one rate cut, it will happen it will start to come into view, maybe second half or maybe next financial year. But as things are, where are valuations now and are we close to crossing that hump?
Forlenza: What if I speak a little bit about, not just the valuation, but investor sentiment that we have seen, really since mid-2023 globally in the markets. I am fortunate that I spend a lot of my time travelling the globe and speaking to global investors. If I think back to kind of mid-2023 into early 2024 one of the main themes was from global investors, the current concern not only of the performance of the Chinese market, but the volatility of that market. And it was clear that fund flows were going to move out of China into other markets. And those themes were really three. One was the Magnificent Seven, money was moving there in the US, but it was also into Japan, given some of the reforms, and very much into India, which I saw getting more attention than I had previously seen in years.
We hear global investors that were doing a lot of work on Indian companies and the Indian market. There was some concern on valuation at that point. It’s interesting that, as Aashish said, the market here has been largely range bound, since our conference last year, which happened to have been the peak, I believe, of the market for last year, and we saw money leave India and head back into China. I would call that more of a trade.
Where are we now? If we look at valuations, the market right now is not trading at historic highs and the premium versus the MSCI EM baskets is right where it historically has been. I believe we are set up right now for a time for investors, and I have seen it here at the conference, who have come into India, who have not been here before, who are now trying to learn more about India. And they are seeing the growth. And importantly, what excites us is the amount of companies that are coming public, which is something the world needs.
Agarwal: Even China markets and Korea markets doing well is probably a great thing to happen to the EM asset class as a whole. Because last few years, the only market that was probably driving the EM rally was India, and we have seen a lot of outflows from EM funds. Given what has happened in the last 12 months in other EM markets, we are now starting to see a lot of investors have been talking about it, inflow of funds in EM markets, and of course, India also stands to benefit. Rising tide lift all boats kind of a thing, so in a way, I think China and Korea doing well is also good for India.
Q: It is very clear that India cannot offer, as of now, in a very big, decisive way to global investors, tech or AI. I mean, you don’t come to India to play tech or AI? What are you telling global investors at this point in time? Why should they come to India to play a bigger part of the consumer story? Do you think that’s kicking off or reviving in a big way, or is it going to be more about manufacturing, the whole China plus one, realignment of global supply chains. What’s the narrative and why are you telling global investors to look at the Indian market at this point?
Forlenza: The narrative begins with India is now the world’s fourth largest economy, heading to be number three with an emerging middle class, with an entrepreneurial culture, where we have many companies that will be high growth companies that are coming into the market.
The world is looking for new companies. Again, I would argue that we grow globally, our overweight a lot of that – I would say not just the, I will be more specific than the broad Magnificent Seven, you have got the hyperscalers plus Nvidia. The world has been overweight that. We did see money go into Europe this year, but when you look at India again, a growing economy, a populist that has an emerging middle class that has a fantastic education system, and again, has this entrepreneurial culture. It is a place that will continue to grow and again, we are going to have more exciting companies to invest in.
For the entire discussion, watch the accompanying video
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