Short-term volatility may persist, but FII flows and economic activity to keep sentiment positive: Vikas Khemani

Time of India

20-05-2025

"There are no major risks around from a fundamental perspective. Now, any news flow can develop which can create short-term volatility, which cannot be controlled. So, net-net I am not feeling very negative about markets," says
Vikas Khemani
,
Carnelian Asset Management
.
Lots is happening in the
market
right now. You have the
Moody's downgrade
coming in for US. On the other side you have China that has cut its lending rate. Give us a sense of how you are expecting all of this to fundamentally impact our market. Where are we headed on the sentimental front and what is the market construct looking like from the near to mid-term for you?
Vikas Khemani:
Lot of uncertainties have been around, but many of them have got cleared and markets are full of uncertainties always as we know that things keep coming. So, I have never seen in market when there is no uncertainty around and that is there. But broadly two major, tariff and the border escalation, both are more or less behind. But at the same time generally speaking I am quite positive on the Indian markets because India growth story continues to remain fine.
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There are no major risks around from a fundamental perspective. Now, any news flow can develop which can create short-term volatility, which cannot be controlled. So, net-net I am not feeling very negative about markets.
The key trigger could be how the BTA between us and India progresses and what are the early news around that. If we get a good outcome on that, probably market might rally. But in general generally speaking markets are in a good shape. FII flows have picked up. Activities in general have picked up.
So, mood seems to be kind of reasonably alright. So, hence, I do not see much volatility, but you can never predict short-term risk, always it comes from the sources you do not expect and it comes from when you do not expect.
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Given the fact that a lot of these uncertain news pieces are actually out of the way, some sort of a clarity or semblance actually coming in when you talk of the global markets. But tell me one thing, if one has to read between the lines, the way how the US economy is shaping up, would not that actually pose to be a concern for export-oriented companies, especially the IT sector in particular given the fact that we are now talking about the ballooning deficit, the debt levels being high, also there are some sort of indications that there are some delinquencies when you talk about credit card payments in the United States as well. When you talk about all of these scenarios, you think you can be positive and continue to hope things to get better going ahead and especially when I talk about that the Indian IT sector that will get impacted the most.
Vikas Khemani:
All these three things about US economy you have been talking about have not surfaced with the rating downgrade, it has been around for more than one-and-a-half, two years I know. I mean, US debt, deficit, or for that matter delinquencies in their credit card has been around for two years.
I mean we have seen IT sector has been reasonably alright, growing well in last three-four years and these kind of intermittent cycles come in any industry. We are not very negative on IT sector. We have been saying for quite some time and continue to remain positive because it is not only necessarily linked to economic growth, because a lot of digital transformation has to happen, the cost rationalisation has to happen, IT is a key enabler of that. So, there are many more levers other than only the economic growth. A lot of times companies have to spend money in order to just survive forget about grow.
And some of the sectors which are in the manufacturing front where India is not much exposed to US, there India stands to benefit from the market share gain which is happening because of China plus shift and that can compensate for if economy slows down.
Currently, there is no such sign, but if that slows down and market share gain can compensate for that. So, I do not see US economy slowing down as a major risk to Indian economic growth. Market sentiments can go up and down depending on how the news flow comes, but I do not see a major economic risk if US were to slow down to India.
You did say that there are a lot of other manufacturing themes also that one can watch out for given the fact that you will have the China plus one strategy also at play that could benefit some of them. So, which are some of those sectors that one should watch out for very closely given the fact that we are actually trying to get some sort of strength back home in those sectors?
Vikas Khemani:
Sector broadly remains same. We have been quite positive on banking and financial services. We have been positive on manufacturing. We have been positive on the entire pharmaceutical space.
So, in general we have been very positive on the spaces which are aligned to Indian economy and generally that is what is kind of happening. So, sectors and economies really do not change very often because India is in a very structural transformative growth cycle and this is going to last for long.
So, it is the only thing is that which will grow faster. So, at this point in time we are significantly overweight in banking and manufacturing as I said and there are sort of stocks within the consumption you pick up, there are stock in the IT sector in the mid and smallcap space which are doing well. So, these are some of the areas of exposure we do have.
After your visit to Omaha where you did visit the Berkshire Hathaway shareholder meeting, we are connecting now on the channel. Give us some sense that what has your been the major key takeaway because this shareholder meeting was indeed a special one because from next year on you might not see
Warren Buffett
taking the centre stage.
Vikas Khemani:
I do not know that whether next he will be there, he is still chairman. So, you will learn a lot from the legend and we all know that he is a legend and all the learnings are definitely around, he has been very-very big believer of long-term investing, compounding, which stands out with associating with good quality people whether it is as an employer or whether is a partner that he has been espousing for very-very long time.
So, quality of people you associate with is a very-very important. It stands out in every interaction. So, there are lots of takeaways one can take from when you meet Oracle of Omaha, he is a legend.
And plus, how disciplined he could be, even if despite having so much cash on the books how he has been and how he is transitioning to the next level of leadership.
The moment you realise that he is kind of slowing down in his decision-making, he is very happily kind of letting it go. So, these are some of the quality. You admire him as a person. You admire him as an investor. You admire him as a leader. So, there are lots to learn. I mean, one can probably do an hour show on that.