Latest news with #NishanthVasudevan
Economic Times
2 days ago
- Business
- Economic Times
US market outlook: Indian market recovery driven by govt spending & rural demand: Gokul Laroia, Morgan Stanley
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The recovery in Indian markets is entirely a function of the revival of government spending and rebound in rural demand, said Gokul Laroia, CEO Asia and co-head of global equities, Morgan Stanley . In an interview with Nishanth Vasudevan, Laroia spoke about US markets, the dollar and Indian IPOs, among other topics. Edited excerpts:We're positive on the US market because I think all the growth-unfriendly or market-unfriendly actions were taken first. The growth-friendly actions like tax bill, deregulation and financial conditions easing are now coming. And, earnings revisions in the US appear to have bottomed out and, in fact, are now inflecting and becoming more view on the US market continues to be pretty constructive. Now, all of this comes with a caveat. If you don't get a resolution to a lot of the more complicated trade situations, like those with the EU or China, that's obviously going to remain a headwind-and a persistent one. Which is why I tend to feel that the deal with India is actually more India, the market recovery is entirely a function of the revival of government spending and rebound in rural demand. Even if you don't see 7.5% persist, but say, 6.5% real GDP growth and 10-10.5% nominal-that'll provide a lot of support to the markets. Because that'll translate into mid-teen earnings growth and mid-teens ROE.A lot of people actually question the "Multiple India" trade. They say it's expensive, etc. And yes, it's expensive relative to where other markets are trading. But show me a market outside of the US that has high earnings growth, high return on equity, and low volatility. The US trades at 21-22 times earnings too. India trades at 21-22 times earnings. You could argue that the growth rates in India are higher but then the cost of capital in India is also six to eight months, the view was very cautious because of the slowdown in the macro, and earnings disappointment. Some capital was reallocated to China tech after DeepSeek, some capital went to Europe because there was this notion of fiscal expansion in Europe out of Germany. I think that's inflected. The global guys, or at least the classic long-only global guys, tend to be value-conscious. There's a view that India is expensive as a market. But honestly, for as long as I've been doing this, I can't think of a time when India hasn't been expensive as a market. But it continues to perform as a market because I think you've got to think about value in the context of earnings growth, returns on equity, low beta and macro variables. You get that package at 21 times earnings, not at 12 times is going to slow in the US. So a combination of what was actually supporting the dollar is now not going to be there. Our view is that the dollar continues to weaken for the foreseeable future. This year it's down against a basket of major trading partners by about 7-8%. We're of the view that it probably drops by an equivalent amount over the course of the next year or has a whole variety of factors at play. The most important one is the assessment of the US fiscal deficit. And, this tax bill is going to be growth accretive, but the concern that it's creating is that the deficit stays close to 7%. And a 7% deficit will mean that the US government is going to have to borrow a lot. And if the US government has to borrow a lot, then what happens to yields is a big question. Particularly as the traditional buyers of US Treasuries-Japan, China, perhaps even the EU-are perhaps not going to be as big as they were in the past.A little bit of it has happened. But if you think about it in the context of the amount of money that went into the US over the last 10 years versus the amount of money that's actually come out. It's very, very small. And the number one reason for that is that there is no market in the world that gives you the kind of scale the US market to do that in meaningful way is limited, just given scale and depth of markets relative to scale and depth of US. Historically, when the dollar weakened, money flowed into emerging markets. Can that happen again? Money has flown out of the US to emerging markets. But at the margin. Emerging markets can't absorb that much money. I mean, the amount of foreign capital that over the last 10 years has gone into the US—forget the underlying asset class—is over $10 trillion. If a few hundred billion moves into EMs, that'll have a real impact on emerging markets. The point I'm trying to make is that this (outflows) will be a small percentage of what came in, because the rest of the world does not have the ability to absorb that kind of capital. That places the US in a pretty special position. In India, there's a flood of paper (IPOs, promoters selling) in the best thing for Indian market is more paper coming, more liquidity getting generated as a result of paper, and more asset managers trading these markets more actively. If there's too much paper, it has a near-term impact.
Time of India
2 days ago
- Business
- Time of India
Indian market recovery driven by govt spending & rural demand: Gokul Laroia, Morgan Stanley
The recovery in Indian markets is entirely a function of the revival of government spending and rebound in rural demand, said Gokul Laroia, CEO Asia and co-head of global equities, Morgan Stanley . In an interview with Nishanth Vasudevan, Laroia spoke about US markets, the dollar and Indian IPOs, among other topics. Edited excerpts: How would you term the recent rebound in the market? Does it give any confidence that the worst is over? by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Many Are Watching Tariffs - Few Are Watching What Nvidia Just Launched Seeking Alpha Read Now Undo We're positive on the US market because I think all the growth-unfriendly or market-unfriendly actions were taken first. The growth-friendly actions like tax bill, deregulation and financial conditions easing are now coming. And, earnings revisions in the US appear to have bottomed out and, in fact, are now inflecting and becoming more positive. Our view on the US market continues to be pretty constructive. Now, all of this comes with a caveat. If you don't get a resolution to a lot of the more complicated trade situations, like those with the EU or China, that's obviously going to remain a headwind-and a persistent one. Which is why I tend to feel that the deal with India is actually more straightforward. What about Indian markets? In India, the market recovery is entirely a function of the revival of government spending and rebound in rural demand. Even if you don't see 7.5% persist, but say, 6.5% real GDP growth and 10-10.5% nominal-that'll provide a lot of support to the markets. Because that'll translate into mid-teen earnings growth and mid-teens ROE. Live Events Aren't valuations a sore point? A lot of people actually question the "Multiple India" trade. They say it's expensive, etc. And yes, it's expensive relative to where other markets are trading. But show me a market outside of the US that has high earnings growth, high return on equity, and low volatility. The US trades at 21-22 times earnings too. India trades at 21-22 times earnings. You could argue that the growth rates in India are higher but then the cost of capital in India is also higher. Do global asset allocators think the same way about India? Last six to eight months, the view was very cautious because of the slowdown in the macro, and earnings disappointment. Some capital was reallocated to China tech after DeepSeek, some capital went to Europe because there was this notion of fiscal expansion in Europe out of Germany. I think that's inflected. The global guys, or at least the classic long-only global guys, tend to be value-conscious. There's a view that India is expensive as a market. But honestly, for as long as I've been doing this, I can't think of a time when India hasn't been expensive as a market. But it continues to perform as a market because I think you've got to think about value in the context of earnings growth, returns on equity, low beta and macro variables. You get that package at 21 times earnings, not at 12 times earnings. Coming to the US, this is the first time in recent times we are seeing the dollar sliding and Treasury yields going up. What are your thoughts? Growth is going to slow in the US. So a combination of what was actually supporting the dollar is now not going to be there. Our view is that the dollar continues to weaken for the foreseeable future. This year it's down against a basket of major trading partners by about 7-8%. We're of the view that it probably drops by an equivalent amount over the course of the next year or so. And the US Treasury yields ? That has a whole variety of factors at play. The most important one is the assessment of the US fiscal deficit. And, this tax bill is going to be growth accretive, but the concern that it's creating is that the deficit stays close to 7%. And a 7% deficit will mean that the US government is going to have to borrow a lot. And if the US government has to borrow a lot, then what happens to yields is a big question. Particularly as the traditional buyers of US Treasuries-Japan, China, perhaps even the EU-are perhaps not going to be as big as they were in the past. So, is the risk-off sentiment in dollar-denominated assets for real? A little bit of it has happened. But if you think about it in the context of the amount of money that went into the US over the last 10 years versus the amount of money that's actually come out. It's very, very small. And the number one reason for that is that there is no market in the world that gives you the kind of scale the US market does. The question is where are you going to go if you have meaningful amounts of capital to deploy? Ability to do that in meaningful way is limited, just given scale and depth of markets relative to scale and depth of US. Historically, when the dollar weakened, money flowed into emerging markets. Can that happen again? Money has flown out of the US to emerging markets. But at the margin. Emerging markets can't absorb that much money. I mean, the amount of foreign capital that over the last 10 years has gone into the US—forget the underlying asset class—is over $10 trillion. If a few hundred billion moves into EMs, that'll have a real impact on emerging markets. The point I'm trying to make is that this (outflows) will be a small percentage of what came in, because the rest of the world does not have the ability to absorb that kind of capital. That places the US in a pretty special position. In India, there's a flood of paper (IPOs, promoters selling) in the market. Does that tend to cap the upsides for equities? The best thing for Indian market is more paper coming, more liquidity getting generated as a result of paper, and more asset managers trading these markets more actively. If there's too much paper, it has a near-term impact.
Economic Times
12-05-2025
- Business
- Economic Times
Conflict impact on markets limited but India lacks stronger drivers: Christy Tan, Franklin Templeton
For the Indian equity markets to go from strength to strength, there have to be stronger drivers. And that could be something that is missing. And if you accompany that with rich valuations, then that could set the stage for the upside prospects to be quite limited. So, there's a need to be really selective, increasingly so now than previously. That is the formula to get more returns out of Indian assets. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The impact of the India-Pakistan conflict on the markets will be limited, said Christy Tan , MD and Investment Strategist-APAC, Franklin Templeton Institute. In an interview with Nishanth Vasudevan, Singapore-based Tan spoke about her views on India, China and investing in equities among other topics. Edited Excerpts:Given current assessments, we think the impact on Indian assets will be limited, as a full-blown war remains unlikely. The US, EU, UN, China, and Russia have responded, and most have actively facilitated dialogues and de-escalation the Indian equity markets to go from strength to strength, there have to be stronger drivers. And that could be something that is missing. And if you accompany that with rich valuations, then that could set the stage for the upside prospects to be quite limited. So, there's a need to be really selective, increasingly so now than previously. That is the formula to get more returns out of Indian market is probably shifting from that sentiment-driven tone to a more fundamentally driven one after Donald Trump's more conciliatory stance towards tariffs and deals. So, we might still, along the way, be experiencing some volatility because markets are still very sensitive and very reactive to what Trump says. And there is no prediction as to what he would say that could put markets in a tailspin at the end of the day, we are looking at a reduced level of uncertainty because we are moving nearer towards potentially the announcement of some trade deals with some countries. Markets could potentially switch to more base case is still that the US would be able to avoid or escape a recession, given that it is, after all, a more services-driven economy. There's not a large amount of pressure in the financial sector or in the real economy sectors. But we will see default rates start to increase. We'll see delinquencies start to increase. And this is coming up from a very low point-well below the 25-year average. So, is that sufficient to push the economy into a recession? Perhaps have been prioritising diversification because the geopolitical situation hasn't abated. You still need to build a more resilient portfolio. If you think that equities are too risky, a good substitute could be high-yield credit. Over the years, ever since the pandemic, the quality of this high-yield credit has improved. And the companies that were able to withstand the high cost of financing from the Fed's rate hikes continue to be able to weather all this, and spreads have tightened so much. Even though they've widened recently, they're still also within manageable levels. A lot of people think gold and crypto probably are safe havens. That is arguable. It should be thoughtful diversification and looking at risk-reward in a manner where you really comb through the whole fixed income spectrum. It's not just about the 60-40 portfolio within the two main assets (equity and debt).There are some signals that we follow that have shown the stock market tends to bottom up and return like 14-15% a year later. So, don't wait for volatility to come off. If you wait until volatility comes off- like if VIX goes from 40 to 20-you would have missed that front part of the rally, because markets tend to bottom before that. And, don't wait until the recession gets announced, because finally, when the recession gets announced, that is when the markets start to go the short term, the US has lost its exceptionalism. However, we will probably not yet see a huge, significant reversal of flows from the US. I think a large part of that rotation is within the US, from perhaps equities to fixed income. In the past, you could have the stock market falling, but the dollar increased. Now the risk is a trifecta of falling stocks, rising bond yields, and a falling dollar. So that trifecta of risk will be quite instrumental in getting investors basically to reassess their portfolios and really shift out of the US But that need not be the emerging market. That could be in Europe. It looks attractive. Investors have been super confused about in China could look cheap, but it could be cheaper. The only thing about valuation is whether there is something to look forward to. It's either fiscal and monetary policies or the right combination. Markets will have to tame their expectations of what Chinese policymakers will do, because Chinese policymakers will not do a bazooka. There are good reasons for that.
Time of India
12-05-2025
- Business
- Time of India
Conflict impact on markets limited but India lacks stronger drivers: Christy Tan, Franklin Templeton
The impact of the India-Pakistan conflict on the markets will be limited, said Christy Tan , MD and Investment Strategist-APAC, Franklin Templeton Institute. In an interview with Nishanth Vasudevan, Singapore-based Tan spoke about her views on India, China and investing in equities among other topics. Edited Excerpts: What is your assessment of the impact of the India-Pakistan conflict on Indian markets ? Given current assessments, we think the impact on Indian assets will be limited, as a full-blown war remains unlikely. The US, EU, UN, China, and Russia have responded, and most have actively facilitated dialogues and de-escalation efforts. Beyond the tensions, how are you evaluating India as an investment destination? For the Indian equity markets to go from strength to strength, there have to be stronger drivers. And that could be something that is missing. And if you accompany that with rich valuations, then that could set the stage for the upside prospects to be quite limited. So, there's a need to be really selective, increasingly so now than previously. That is the formula to get more returns out of Indian assets. Globally, the optimism in the markets seems to be back. Is it some that's here to stay, or is it just the calm before the storm? The market is probably shifting from that sentiment-driven tone to a more fundamentally driven one after Donald Trump's more conciliatory stance towards tariffs and deals. So, we might still, along the way, be experiencing some volatility because markets are still very sensitive and very reactive to what Trump says. And there is no prediction as to what he would say that could put markets in a tailspin anyway. But, at the end of the day, we are looking at a reduced level of uncertainty because we are moving nearer towards potentially the announcement of some trade deals with some countries. Markets could potentially switch to more fundamentals. Did you see a recession in the US? The base case is still that the US would be able to avoid or escape a recession, given that it is, after all, a more services-driven economy. There's not a large amount of pressure in the financial sector or in the real economy sectors. But we will see default rates start to increase. We'll see delinquencies start to increase. And this is coming up from a very low point-well below the 25-year average. So, is that sufficient to push the economy into a recession? Perhaps not. The one question that everyone has is how and where to invest when there's so much policy uncertainty? We have been prioritising diversification because the geopolitical situation hasn't abated. You still need to build a more resilient portfolio. If you think that equities are too risky, a good substitute could be high-yield credit. Over the years, ever since the pandemic, the quality of this high-yield credit has improved. And the companies that were able to withstand the high cost of financing from the Fed's rate hikes continue to be able to weather all this, and spreads have tightened so much. Even though they've widened recently, they're still also within manageable levels. A lot of people think gold and crypto probably are safe havens. That is arguable. It should be thoughtful diversification and looking at risk-reward in a manner where you really comb through the whole fixed income spectrum. It's not just about the 60-40 portfolio within the two main assets (equity and debt). What about equities? There are some signals that we follow that have shown the stock market tends to bottom up and return like 14-15% a year later. So, don't wait for volatility to come off. If you wait until volatility comes off- like if VIX goes from 40 to 20-you would have missed that front part of the rally, because markets tend to bottom before that. And, don't wait until the recession gets announced, because finally, when the recession gets announced, that is when the markets start to go up. Do you see some kind of rotation of long-term capital from the US to emerging markets? In the short term, the US has lost its exceptionalism. However, we will probably not yet see a huge, significant reversal of flows from the US. I think a large part of that rotation is within the US, from perhaps equities to fixed income. In the past, you could have the stock market falling, but the dollar increased. Now the risk is a trifecta of falling stocks, rising bond yields, and a falling dollar. So that trifecta of risk will be quite instrumental in getting investors basically to reassess their portfolios and really shift out of the US But that need not be the emerging market. That could be in Europe. It looks attractive. Investors have been super confused about China. What is your take? Valuation in China could look cheap, but it could be cheaper. The only thing about valuation is whether there is something to look forward to. It's either fiscal and monetary policies or the right combination. Markets will have to tame their expectations of what Chinese policymakers will do, because Chinese policymakers will not do a bazooka. There are good reasons for that.
