Whereas we’re awaiting extra readability on the sort of tariffs India might face from the US, we’re additionally seeing robust US retail gross sales and low weekly jobless claims — all of which sign a strong US financial system. What do you suppose the markets are more likely to consider, and the way do you see the greenback index evolving from right here?
Anurag Singh: Earlier than I get to the greenback, let me first speak concerning the financial system. The US financial system is doing very nicely. Sentiment, enterprise outlook, and optimism are at unprecedented ranges. I’d warning in opposition to some widely-read publications — notably just a few distinguished ones from Europe and the US. I received’t identify them, as I work together with them as nicely. However for those who go by their narratives, it feels just like the US financial system is headed downhill. The truth is kind of the other. The US is prospering. Enterprise and client optimism are excessive, employment is at peak ranges, and progress seems sustainable.
The current invoice has already decreased taxes, and extra deregulation is anticipated from the federal government. On prime of that, the Federal Reserve now appears extra open to price cuts, which additional strengthens the financial basis. So total, it is a very constructive setting for each the financial system and the markets.
Now, on the greenback — as we’ve mentioned earlier than, a modest weakening from 108 to 104 and even 102 was acceptable. However what we’re seeing now could be extra of an oversell. A lot of this stress has come from positioning by Chinese language and Japanese buyers. I consider a few of that can reverse, and the greenback index may transfer again to the 100–102 vary. That mentioned, there’s a contrarian view — some consider the greenback may weaken additional. However for my part, cash will in the end circulation again to the greenback, and the present European enthusiasm could also be short-lived. So sure, that’s my tackle the US financial system and the greenback outlook.
How is sentiment shaping up for rising markets, notably India? Taking cues from the US, benchmark indices right here have been inching larger and even hit document closes. May this development profit India and broader EMs?
Anurag Singh: The problem with India is that it is not an affordable market. It does attempt to appropriate, however it’s principally a narrative of flows. Systematic Funding Plans (SIPs) and retail inflows — practically ₹50,000 crore a month — are stopping any significant correction. Of your entire market, solely about 15% is held by FIIs, and the remainder is essentially retail-driven. Promoters could also be promoting on the margins, however broadly, home shopping for continues to help the market.
That mentioned, I don’t see the market racing forward both. Development and earnings are solely within the excessive single digits, so we’re probably in for a interval of consolidation. Over the previous 5 years, the Nifty delivered ~20% returns and mid- and small-caps grew round 30%. It’s cheap to now anticipate a pause. Everybody is aware of it is an incredible market, however the whole lot is already priced in. FIIs will not be dashing in proper now — they might enter selectively, however broad-based participation appears unlikely. Valuations are truthful, and there are not any bargains — that’s my evaluation.
Shifting focus again to the US — particularly in gentle of current banking earnings. Many main US banks have reported outcomes which are in line or higher than expectations. In distinction, India’s Q1 banking outcomes are anticipated to be muted as a result of slower credit score progress. What’s your tackle the resurgence of banking efficiency within the US?
Anurag Singh: Financial institution regulation within the US is present process vital change. In the event you return to 2008, when President Obama took workplace, the Dodd-Frank Act launched a heavy regulatory burden — pushed by figures like Elizabeth Warren. Through the years, this throttled the large banks — JPMorgan, Wells Fargo, Citi, Financial institution of America, Goldman Sachs, and Morgan Stanley.
Now, lots of these restrictions are being rolled again. For instance, some constraints on Wells Fargo have been eliminated, and Goldman Sachs management is sounding optimistic. Over the subsequent 3–4 years, even small banks are being free of regulatory stress. This elimination of “regulatory ldl cholesterol” will considerably profit the US banking sector within the medium time period, and that’s already being mirrored in inventory efficiency over the previous yr.
In India, the scenario is completely different. Credit score progress has already been phenomenal. Retail credit score to GDP doubled from ~20% to over 40% in simply 5 to 6 years. However now incomes will not be preserving tempo, and households are extremely leveraged — limiting additional borrowing capability. Consequently, credit score progress is slowing, stabilizing round 10–12%, which is according to nominal GDP. Whereas banks stay funding and aren’t overly costly, one should keep in mind that banking is cyclical. After just a few robust years, some consolidation is anticipated — and we’re coming into that section now.
Given your present view on India’s valuations and the early phases of earnings season, what’s your portfolio technique? Ought to one maintain off, or are there sectors or shares you’re monitoring intently primarily based on how earnings evolve?
Anurag Singh: A yr in the past, individuals quietly suggested moderation in return expectations. Now, even main mutual fund voices are overtly saying: do not anticipate greater than 7–10% yearly for the subsequent few years. The Indian market is pretty valued. There are not any clear bargains.
In the event you’re already invested, keep invested. In the event you’ve had a 20% return yr, you possibly can’t anticipate that yearly — that is simply how it’s. However don’t leap in with the whole lot without delay. Don’t promote your loved ones silver to enter the market proper now.
Hold the cash flowing in slowly, however be cautious. I’ll nonetheless level out a few sectors. Healthcare — notably past pharma — like hospitals and diagnostics, seems to be promising. These companies are rising sooner than the financial system and have pricing energy, in order that they’re well-positioned.
Apart from that, be cautious. Multiples might contract as progress slows. You’ll want to trace the US market intently for additional cues. Banks are fantastic — particularly the highest two-three non-public sector names — I’ve all the time favored them. I’m much less optimistic about PSU banks.
I stay cautious on life insurance coverage — that sector appears to have peaked. Regardless of all of the hype, insurance coverage shares haven’t completed a lot. Broking and capital markets are overheated — we now have 18 crore Demat accounts. That progress can’t go on without end, in order that house additionally seems to be stretched.
General, keep cautious. Hold some funds on the sidelines. Allocate 20–25% to bonds. I’ve all the time advocated for balanced investing — blindly pushing cash into SIPs solely inflates valuations additional. Traders must mirror and reassess.
This can be a time to carry your horses, stick with protected large-caps, and keep away from hyped-up sectors like defence the place valuations appear unjustified — regardless of the story. Additionally, steer clear of IPOs for now. That, in essence, is my present portfolio stance.
