I just wonder where all this tariff discussion will finally make progress. At least there are two problems for India – the rates themselves and the cheaper import of Russian oil, which seems to be a dispute bone. How do you think these strategic dialogues will actually come true? And has the market already absorbed and has taken note of how bad it can be?
Mark Matthews: Usually, when the bosses meet – that is what will happen in Alaska on Friday when Putin and Trump meet – their employees have already done the preparatory work, and it is actually a ceremonial event to announce that they have come to a kind of deal. Unfortunately I don’t think this is the case this time. It is more like when Trump met Kim Jong un in 2018. They actually said they wanted to become friends, but there was no deal. However, it helped to reduce tensions on the Korean peninsula. So my feeling is that they will probably have a nice photo and say that they both agree that a cease -fire is needed and that they want peace.
Now, if I am wrong, the optimistic scenario is that they both now agree with a cease -the border, with the definition of the border where the troops are currently -a bit like what happened in Cyprus. So the hostilities would still continue in a frozen state; The war would not be officially closed, but things would be paused. The Ukrainians may not like that, but if the Americans and Russians agree, I don’t know how much they can do. I feel that that is a less likely scenario.
Regarding the impact on India, I am sorry to say that I do not think that India is very high on the list of priorities of Trump in this coming conversation in Alaska. From his perspective – if I try to think the way he does – he is a person who is resenting, let’s be honest. If he believes that India has not done enough to put pressure on Russia to come to the table, he can retain that resentment and it can affect the tariff discussions. I really don’t know if he feels that way or not; We will just have to wait. Of course Premier Modi called Putin last week and this week he called Volodymyr Zenskyy, the Ukrainian president. So maybe India helps. And of course India has traditionally been an unauthorized country, so it is not India’s foreign policy to get strong in these kinds of situations. But unfortunately I don’t think Trump looks at it like that.
What I really wanted to ask you is your view of emerging markets, since the dollar has fallen and the dollar index now seems favorable for some fund flows in emerging markets. That has not been exactly the case, especially when it comes to India. Our Fii flows are negative and we see no strength on this front. Do you think that emerging markets now look attractive, given the fall we have seen in the dollar?
Mark Matthews: I do. As you know, upcoming markets have been for many years large underperformers-room for decade and what that means is that they are being investigated by both foreigners and their own domestic investor bases. India is an exception because it has actually achieved well in the last 10-15 years, and the domestic investor base has been an active participant in the market, which means that it is actually quite expensive to say the bone. You can’t say that for most other emerging markets – they are really cheap. Emerging markets will continue to enjoy the positive headwind they are currently experiencing, partly because of the weakness in the dollar, which means that their currencies look more stable and tend to attract capital. Many of them actually have pretty good stories. For example, Egypt has implemented many reforms; They allow their currency to act at market prices and sell state companies. As an example, Egypt is focused on income about four times, because it has been in the crazy people for many years. Now we can’t say that about India – it’s about 20 times the price for income. So it is a bit different than most asset classes of emerging market.
Although I often wonder if this is only a tactical step – investors who weaten from US stock markets and use that money in emerging markets. Is it just a wait -and -see approach until there is complete clarity for rates?
Mark Matthews: No, I think the markets believe that rates will not be a problem for the US or the world economy; Otherwise stock prices would not be where they are. So people don’t wait and watch; They buy actively. India, of course, foreigners have not bought. I am not entirely sure why, to be honest – outflow have been so great this year. But the good news is that domestic investors have been very willing buyers, so although it is not a great market this year, the Benchmark Nifty is only flat, not negative.
I go through some of your sectoral views and banks remain your favorite choice, especially the larger ones. What is your opinion about banks at the moment? Because if you look at Q1 income, with one or two banks, we have not seen any beats or positive surprises. So how do you weigh this sector in your total portfolio?
Mark Matthews: We are quite selective in the sector. I don’t think I can mention names on television, but we are really stocks in the sector. In general, banks form the heart of every economy, including those of India. If you think the economy is doing well, banks must benefit. In India there are major tax cuts from the budget that have to go through to the economy. The caution that RBI placed last year on banks that expand the new credit-so that the loan-to-deposit ratio quickly increases in previous years. RBI has reduced the rates with 100 basic points in the last five months and we have arrived the festive season. All these should support good economic growth, and banks would be a proxy for that.
We have also seen a big shift to AI, and the Indian IT services have been fed back while the technological transition is set. That said, the neighborhoods of IT services – because India does not yet produce products such as Apple or Nvidia counterparts – what other emerging sectors look interesting, if present?
Mark Matthews: Apart from the and banks, the catering sector looks very interesting in India. With a rising middle class, intuitively people will take more vacations, want to stay in beautiful hotels and go to nice restaurants. So that’s one.
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