india: India story still exciting; expect 20% earnings growth over next 2-3 years: Mark Matthews

“Not only for India but for the world, 2022 is just a turning year. I don’t see why this should be a huge down year. The biggest reason I say is that I personally feel that inflation is peaking even when oil prices are high and therefore the magnitude of the rate hike cycle in the US will not be as strong as the market is predicting. If that’s true, it takes a lot of the pressure off the market,” says Mark MathewsMD, Julius Bere,

If the India story that you have always advocated is strong, then why are Indian markets getting such step-motherly treatment from foreign investors? Why are the outflows higher in the last few months than the Indian markets after the GFC crisis?
It’s a bit of a mystery because for example South-East Asia or Hong Kong is really geared up for this year and so I don’t know why India would be down because it has a very good story in my opinion. I think just because it went up so much last year, people would like to buy the big laggards and of course South-East Asia and Singapore and Hong Kong were the big laggards last year.

But the other thing that stuck in my mind was probably that selling in emerging market ETFs or Asian ETFs is passive and when people are saying they don’t want to be in emerging markets as a whole or all of Asia, they’re probably mostly thinking. There have been China and they are not even aware that they have more exposure than India. But I can’t explain it. This is a big positive because if we are going through a tough period for the US market, one of the good things about India is that foreigners are not as clingy as 2008 with Indian stocks. I don’t see much. The selling from foreigners has stalled as it has already happened to a large extent.

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Last time we talked, you were overweight in India. You said that there is no point in changing the portfolio on the basis of Ukraine. But given all the uncertainty and volatility. We’ll have to keep an eye on the US Fed meeting in mid-March. Are you still overweight in India?
There are many things to say but the most important thing is that India is in the middle of an economic cycle and this has not been experienced for many years. Banks in the first 10 years of 2020 showed little economic and earnings growth due to structural reforms such as non-performing assets, GST and the bankruptcy code. They’re in the rear-view mirror now and if combined with the digital renaissance, it’s a very exciting economy and that should be reflected in earnings growth of about 20% per year over the next two or three years. This is one reason that makes me committed to the Indian market for the foreseeable future.

Could February 2022 also be the best buying opportunity in the equity markets?
Well there aren’t many days left in this month and so if we somehow go down 15% between now and the end of the month then I’d say yes; But in the absence of that, I don’t think we’ve gone down enough to make it a buying opportunity. It really depends on the magnitude of the fall. As time passes, from the all-time high, the market begins to change momentum and becomes less positive. Psychologically people start thinking that maybe this is not a big bull market like it was before.

This does not mean that it turns into a bear market, but the psychological impact of a market doing so could mean that not only for India but for the world, 2022 is just a turning year. I don’t see why this should be a huge down year. The biggest reason I say is that I personally feel that inflation is peaking even when oil prices are high and therefore the magnitude of the rate hike cycle in the US will not be as strong as the market is predicting. If that’s true, it takes a lot of the pressure off the market, but the psychological damage has certainly been done and while earnings growth in the US will probably only be in the mid single to high single digits this year, India’s earnings will be much higher this year. year increase.

Are you saying that investors, who have been clearly running away from inflation sensitive stocks and sectors in India for at least the last two to three quarters, need to start mulling over if inflation is peaking soon?
Well it would be easy. Will not done? You are right and I have seen in surveys of fund managers that banks and inflation sensitive sectors like commodities and energy have their biggest overweights compared to the average of the last decade. I think the issue is whether rates will go up and how high is yet to be decided.

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