Manishi Raichaudhuri, a veteran investor in Asian stocks, said: “There are cheaper alternatives available to investors that deliver a similar growth profile, medium-term earnings growth profile, but at much lower valuations.” I think people are starting to understand that.”
If you’re a long-term bull, ETFs are said to be the best and cheapest way to go. So I keep it very, very, very simple. But the client will say, “I know.” Please tell us what we don’t know. So what are you telling your clients and prospective clients that they don’t know about market connections, connections, and valuations?
Manishi Raichaudhuri: Well, in the short term, we might be telling them not to invest in India, even in ETFs. If you’re looking for value for money parking, Gold is a good option. What I personally do is gold ETFs. Yes, I will explain all this in detail. Why not India?
Manishi Raichaudhuri: Why not India? Two things. First, see how. This is probably the most important variable we all need to pay attention to, the consensus earnings forecast. I actually don’t pay much attention to this whole topic or discussions of things like GDP growth. While this is a good topic, it doesn’t really produce any benefits. Looking at India’s consensus EPS forecast, all indicators show a decline of approximately 7% since late September. Although the market is down 10%, this means valuations haven’t actually corrected all that much and remain about the same highs as they were in mid-to-late September.
The argument becomes even more damning when you look at India’s relative valuation against Asia excluding Japan. India trades at a premium of around 62% to Asia ex-Japan on a forward PE basis. The long-term average is 38%. Reserve prices carry a premium of 80% to 90%.
The long-term average is 60%. These premiums need to be fixed. It can happen in two ways. Either India corrects or other Asian countries rise. The latter is happening at the moment. Look at how Hong Kong has acted recently, look at how South Korea has acted. Korea’s price has increased by about 5-6% this year.
I think investors are starting to understand that there are cheaper alternatives available at much lower valuations while achieving similar growth profiles and medium-term earnings growth profiles. Can we compare past averages to predict the future? The historical averages are obtained because interest rates are different, dynamics are different, and political policies are different. When I say we’re okay, India is trading at a premium to China, but I say China is a different beast. How can you compare the two?
Manishi Raichaudhuri: At the end of the day, stock prices are cash flows discounted to their present value. Now, if you believe that there are certain stocks in this world that are likely to generate a certain amount of cash flow in the future within a foreseeable period, then it makes sense to compare similar stocks over time. Masu. So when we compare Indian consumption, we assume consumer staples like levers, or worse, paint companies like Asian Paints, and compare them to some Chinese consumers or consumer agents. Let’s compare. Yes, these cash flow growth rates will be much lower in China.
But even considering that the valuations aren’t really comparable, India’s valuation is probably horribly high, so that’s what worries me, and in the particular situation of falling earnings expectations, it could be even more I’m worried. Tomorrow will be expensive.
So, apart from some consumer markets like staples and Asia, which is of course a special story because there’s competition in this space, valuations are way ahead of the curve and people are setting multiple prices. Where do you feel like you belong? Even if it’s two years from now. We don’t think we’ll actually see that kind of revenue growth.
Manishi Raichaudhuri: A lot of public sector companies, a lot of defense companies, a lot of these are the darlings of manufacturing. This means that most of the industries, manufacturing, and consumer goods that make up a significant portion of the market will fall into that category.
We were warning our viewers that the IT sector was still bullish, but we were just listening to the comments. It’s kind of a mixed bag. Even some of the companies that have announced decent earnings guidance hikes aren’t attracting investor interest at this point. So, what do you think about IT?
Manishi Raichaudhuri: IT Unlike many sectors that investors are currently focused on, which are fundamentally domestically focused, the Indian IT sector generally derives revenue from developed markets, namely the US. I am getting. We are living in an era of American exceptionalism, with declining US growth rates at a time when everyone thought the US would go into recession. It didn’t happen. No one really talks about it anymore. The U.S. is still expected to continue growing at around 2% to 2.5%, especially since U.S. banks are reporting good numbers and bond yields are high, so interest rates are likely to remain high. , are likely to report similar numbers. Their margins will likely be supported.
These companies are the biggest contributors to IT companies’ profits. So today is not really what we’re talking about today. This means that it is not currently attracting investor interest. We’ll need some more numbers and a little more clarity on the guidance from these companies for interest to build.
But the long, long, long winter is over. TCS is not poised to achieve double-digit growth. Infosys’ numbers don’t add up to the official numbers, which are expected to see double-digit growth soon. Wipro is still a sleepy company in terms of what it can accomplish. So what I’m saying is that there was about 3/4 quarters where we expected the turn to happen, and we don’t think the turn would happen for the next two quarters. So when the market is looking for growth and is hungry for growth, why turn to IT, which is poor in terms of growth?
Manishi Raichaudhuri: You know, I don’t necessarily agree that we won’t see growth clearly over the next two quarters.
With President Donald Trump making a big deal about H-1B visas, things could get tougher, not easier.
Manishi Raichaudhuri: I mean, look at this whole Trump administration and that MAGA team that’s also split across the spectrum. On one side you have the technologists, you have Elon Musk, and then you have the people who actually want to import good, quality talent. On the other side are the Laura Loomers of the world who are pathologically opposed to all H-1Bs.
At this point, if you look at the news flow and footage we’re seeing from the Trump administration, especially the inauguration, it’s clear that big tech companies clearly have more influence over the Trump administration.
After all, they are money bags, that is, they have money. So I’m not going to be too bearish about the negative news flow we’re hearing about H-1B. Because in such a large alliance, there are different opinions on different parts.
What impact could President Trump have on global markets if he assumes power? Because we saw a lot of these comments coming up yesterday after the inauguration. The reaction to oil prices was that the United States could lead head-on in the energy transition. There are also several announcements regarding EVs. So where do you think the focus will be?
Manishi Raichaudhuri: One area where the Trump administration’s policies will be very different from the Biden-Harris administration will be the energy policy that he just mentioned. This likely means that many of these climate change agreements and net zero targets could be pushed forward. return. Though not officially, I don’t think India will commit to delaying its net-zero target beyond 2070, and neither will China. But it would also mean slightly more oil production and perhaps oil demand than in the past. Meanwhile, the incoming Trump administration has clearly stated that it will impose tariffs not only on China but also on other trading partners.
He has talked about 25% tariffs on Canada and Mexico, and there is no doubt that that could be a negotiating tactic. We saw that in the Trump I administration, where it took about a year and a half to clarify these policies, and now they’re happening quickly. Well, there is one important difference between Trump 1 and Trump 2. That’s inflation.
We are currently living in a much higher inflation environment and an even higher inflation outlook going forward, which we have heard over the past week that tariffs will be phased in from 2% to 2%. This is reflected in the current debate. 5% per month. This means policymakers are aware of what is actually hitting them. So things are going to be a mixed bag, but we’re going to be hearing a lot of news all the time, at least for the next quarter. Therefore, the situation will become unstable. Take a seat and embrace the uncertainty.
