Equity Markets Perform in India

I am still positive about India in the long run. The stock market in US dollars has been one of the best performers this year. We are up over 22% though I think in a world where we have these artificially low interest rates, I think the market is maybe now a bit ahead of itself and may have a correction but the long term still looks promising.

If we look at equity markets around the world in 2017, we had a very strong performance in Asia and as I said in India and we had a very strong performance in Europe, where many markets are up between 17% and 22%.

So I think given the economic outlook in the world, the second half of the year will not bring about similar type of returns. You have to understand. Europe and the US essentially, almost in a zero interest rate environment, have had this kind of a performance in the first half from equity markets. It is an incredible performance. So my view would be that the second half will be more difficult and I wouldn’t be surprised to see the US market going down or the leadership changing.

The leadership in America has been the FANG stocks—Facebook, Amazon, Apple, Netflix, Google—and similar stocks and I wouldn’t be surprised if these stocks were lagging in the second half of the year and the leadership changes. The same will occur in India where maybe the index will not move much but within the market some stocks will perform well and others not so well. So in other words, going forward it will be a stock pickers market and not an index market.

As I explained, India has had the best performance this year or one of the best performances. Venezuela had a better performance; I should point out, from a very depressed level. So as I mentioned I think that the Indian market could correct given the favourable fundamentals for the Indian economy in the longer term. I wouldn’t be overly bearish and what we also have today in India is a relatively stable currency; the currency has actually appreciated this year and now the rupee may weaken somewhat but, in general, as I said on your programme many times over the last six months, if I have to invest for 10 years and I have to choose between the US and India, I would choose India because I think India will outperform the US. So I hope this answers your question.

Basically I am positive about financial stocks; banks and especially insurance companies will eventually clean up their balance sheets. I believe the long-term potential is huge but equally we have to understand there are huge technological changes on the way in the world, just think of the retailing industry in America; when I started to work in 1970, two blue chip companies were CRS and JC Penney, both of them are about to die and so these technological changes will also change the way banking is carried out and financial institutions that understand these changes and will implement the technologies to accommodate these changes will do well and others in my opinion will not do particularly well.