Private banks lead India's sectoral narrative for global investors: Herald Van Der Linde

Time of India

23-04-2025

"China, to a certain extent India was a bit of an outlier actually, but China and some of the other countries looked like things were starting to improve in those economies and the earnings
growth
was improving as well," says
Herald Van Der Linde
, HSBC.
First up help us with the sentiment that is boarding for the emerging market specifically because of late we have seen that the whole worries with respect to the
Trump tariff
that seems to be abating a bit, but do you believe that the
investors
are once again considering the
emerging markets
in a deep sense and how is India placed overall?
Herald Van Der Linde:
Yes, clearly there seem to be some interest in the emerging markets. Actually, I think that was already rising to a certain extent prior to the announcements of the tariffs in the last two weeks or so. So, there was interest in emerging
markets
rising that is to a certain extent because the growth outlook was starting to get better.
China, to a certain extent India was a bit of an outlier actually, but China and some of the other countries looked like things were starting to improve in those economies and the earnings growth was improving as well. Of course, since then a lot of things have changed. Tariffs have been imposed as of course you all know so very well and that has changed the rules of the games to a certain extent. We now see a weaker dollar that is generally positive for emerging markets.
We see that outflows from the US and they have to go somewhere in the rest of the world and if you are a market that is largely domestically oriented, so not so much exposed to trade and you have a stock market that has already actually come off and where valuations look a little bit more reasonable than they were a year ago, then of course these things start to look quite interesting. So, emerging markets interest comes a little bit back but India within that looks actually pretty okay at the moment.
Also, share with us your view on how much do you believe the Indian domestic growth stories insulated from the tariffs because given other emerging markets in Asia, case in point being South Korea, Taiwan, Japan, Vietnam, we are largely sheltered compared to all of these emerging markets from Trump's tariffs. Now, we understand that you are largely neutral on India. Given that we are so sheltered from the tariffs, what are the triggers that could move your view from neutral to positive on India?
Herald Van Der Linde:
So, the tariffs mean there is going to be less trade around the world. We have seen already economists, our own global economist as well they have reduced the size of the pie, the economies are not growing as fast anymore.
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So, in that sense this is a negative for everybody. But the ones that are more exposed, of course, the ones that export in particular a lot to the US and as you rightly point out Korea, Taiwan, Japan have much bigger exposure and not only in their economies, but in their stock markets as well, in particular Taiwan is very much exposed to selling products in for example the US.
Now, what we have seen in India of course is that growth is actually slowing. So far the guidance has been a little bit better than I would have anticipated, but let us see what happens. But growth is slowing, but still the feeling is that structurally growth in India over the next couple of years should be okay, so maybe earnings growth somewhere between the 10% to 15% or so and in the current kind of global environment that does not look too bad. What do we need to see really to get more positive.
Now, we actually were quite cautious on India 12 months ago, not too long ago we said listen, let us be neutral because we think that is a little bit more balanced because a lot of the things that we were worried about to certain extent had already been priced in by the market or had faded.
You have, for example, valuations lower, the realisation, the earnings growth is not going to be as fantastic as it were over the last years is now well priced into the market, also that you have some policy support that can come through that can be good for the market. So, in that sense India starts to look a little bit better from here on.
But any sectors that you wish to flag off because what we have seen is some of those segments which have the high ownership of the FIIs specifically, those are doing well when it comes to the Indian markets and of late the valuations have also seen to reset themselves for a bit. Help us understand that sectorally how do you see the picture shaping up for the Indian markets as well as where is your interest boarding up well.
Herald Van Der Linde:
The sectors that we talk about with mostly foreign investors is to a large extent large liquid sectors where valuations are reasonable. So, you end up with the banks very often, private banks in particular or where valuations are maybe a little bit more elevated but where at least the growth story is relatively macro insensitive in the sense that for example is dependent on demographic or slow shifts in society that even though interest rates go up or down do not really change that much.
Think about for example rising consumption or for example demand for medical and healthcare in India such as hospitals and these sort of things. So, those are the sectors where we look at as well. So, bank, consumer and I would say selective but domestic healthcare.
Help us understand this dislocation on the ASEAN markets, is it market driven, is it macro driven or is it a confluence of both of these factors?
Herald Van Der Linde:
The dislocation we see in markets is of course too large and driven by the uncertainties that we now have related to policymaking, not only in the US but in other places as well. It is highly uncertain sort of environment and it makes it very difficult for companies to make investments. If you are going to put an investment somewhere in the world, where are you going to put it now and does it mean if you think well the tariffs are going to be imposed x and y, for example you want to be in the US or Mexico, if you are going to go to the US, but the tariffs will be reduced, then you should have gone to Mexico. But if you go to Mexico and the tariffs are not going to be reduced, you should have been in the US. So, it is that uncertainty to investments primarily by firms that is really leading to a sort of yes, dislocation in markets.