50% rate announcement on India. How do you think the investors will take it? Will it be just a knee shock reaction in the market and will the markets probably stabilize?
Prashant khemka: In my assessment, despite the market reaction of the past days, the basicase is that these are not the final rates. It is more of a negotiating tactics. Donald Trump negotiates on two fronts with Russia about the Ukraine war and with India about the commercial conversations. So he uses the same arrow to hit two goals. Also use some leverage for the Russia-Ukraine war. His behavior has been quite predictable. If you also see in the past, when the negotiations come into the final phase, he simply raises what is at stake and then he has no ego or problem when going backwards. I hope and I assume that this is also the basic store here.
He has given 3 weeks, for the 21 days before, extra 25% is applicable, and that is also an indication in my opinion that between now and then we should see some further developments that would lead to definitive rates that are far below the announced 25 plus 25. That said, there is some uncertainty and that is what the market now reflects.
I agree with your opinion on how we have a bit of a while before these rates come into play and there is more room for negotiations considering that we have an American delegation that visits India later this month. What could these negotiations look like, because when the first round of 25% rates was announced, we operated with the assumption that this is the worst and things could gradually become better in terms of negotiation from here. On the other hand, there are Trump’s comments about Japan where he threatens to increase their rates. So this can come true anyway. Where are we going in terms of the next three weeks?
Prashant khemka: As you said, it can come true anyway. But from now on, in the past, the pattern that Trump has exhibited, it seems reasonable to assume that we would settle somewhere lower under what he originally announced, that was 25%. Originally meaning, a week ago or so, he announced 25%. I doubt whether it would establish somewhere near 50%. Although he could increase even further pressure between now and three weeks.
But the way in which the negotiating team responds with patience and keeps our interests in the foreground, because even if you agree with something, let’s say, we signed a deal a few months ago, there is nothing to say that he would not come with further rates. We could have agreed a few months ago and he could still have given extra rates for buying Russian oil. He has done this with other countries, where none other than Canada himself adds extra rates at a later date.
We have to give a little more time and get used to part of this uncertainty. It’s not easy. It is clear that the market can get used to it, but it is not easy for the individual sectors where it has the most influence. But that is the way in which the last few months have been and possibly for some time it can stay that way.What do you advise as a manager as a manager as a manager, what do you recommend doing them now? Sit down with what they are in control, be long term and have a constructive view of the markets or do some carts at the moment because things are still uncertain in selected sectors?
Prashant khemka: Certainly, in the first place, the uncertainty at the market -wide level should not be new to every investor. Whether you look at it for the past 5 years, 10 years, 20 years or more, there has almost always been a great deal of uncertainty, consistent and persistent. In the recent past we only remember the most important such as the Covid, the Russia-Ukraine war and now the rates in April and so on. But between these events there would also be a great deal of uncertainty. It’s just that you tend not to remember them at a later time and to believe me in a few years, you wouldn’t remember today. It would be lost with the most important milestones or markers such as Covid and Russia-Ukraine war, or so on, and so on. So this kind of uncertainty is always normal, although it seems extremely high while you live through those periods. With regard to the portfolio, we will continue to invest in fully. Your second question was whether we find out from one sector to another on the back of such announcements. The reality is that if you would see every time something like that happens, I have not seen anyone who earns that money. Only people who earn money are the brokers because they get brokerage costs in these movements, but investors cannot earn money to make their portfolios on such news and certainly not to finance managers. If you start churbing on the basis of such news, you will completely stimulate the market against yourself with the impact costs. Even individual investors cannot earn money with such macro news.
What if tomorrow or next week or two weeks later the rates will be revised for more acceptable levels and then you will have the opposite and then you will sell what you have just bought today and buy the opposite. So that would not earn money is our opinion. Stay fully invested and maintain a balanced portfolio; Not only have domestic names, not only have export -oriented names, have a good balance. It is clear that it would be mainly domestic oriented names, because that is where the majority of the market itself is, the majority of the opportunities are, and most of the sectors are, but we have the services sector, pharmaceutical, chemicals and some would be in the pressure, while others would do it well and then would be the other way. In general, the idea is to beat the market.
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