0:00
The rupee has gone to 97. It went to 97.
0:04
But then the rupee weakening means our
0:05
imports get more expensive. Our
0:08
crude oil, which is where we are
0:09
dependent a lot on, adds pressure to the
0:12
rupee again because we have to keep
0:14
>> It sounds as if you should take all your
0:17
put it in I guess Taiwan because they
0:19
make the chips, Korea because they also
0:21
make chips and memory, maybe China
0:22
because they seem to have access to
0:24
their alerts, and the US where all the
0:25
innovation is happening apparently.
0:26
>> These feelings inspire me rather than
0:29
depress me. They take the money out in
0:30
hordes, and they have considerably
0:33
changed their view on India because
0:36
India does not have any AI. It's
0:38
interesting that the median profit
0:40
growth of Nifty 500 is like 17%.
0:43
>> That's quite high actually.
0:44
>> That's ridiculous.
0:46
So, it makes sense to invest into Indian
0:49
markets during a period of pessimism,
0:51
understanding that all of these stuff I
0:53
talked about will take you another year.
0:55
But over a four-year period or five-year
0:57
period, you're probably going to see the
0:59
>> Are we doomed? Or do the pessimists have
1:12
>> Hi everyone, and welcome to a new
1:14
episode of the Capitalmind podcast. My
1:16
name is Shrey Chandra, and I'm one of
1:18
the co-founders here at Capitalmind.
1:20
In today's episode, we're going to take
1:22
a look at the concept of peak pessimism.
1:24
Both Deepak and I feel that the
1:26
narratives of India versus those of the
1:28
rest of the world, particularly around
1:29
the AI space, have diverged
1:31
dramatically. India's the place where
1:33
nothing can go right, and AI is the
1:34
place where nothing can go wrong. With
1:36
this, we thought we'd bring in Deepak to
1:39
is this time really different? Is India
1:42
What will prospects be going forward?
1:44
Should you move some of your money
1:45
abroad and invest through LRS or other
1:47
means in global securities?
1:49
And if India is going to do well, what
1:51
should you invest in? So, do listen in
1:53
for a somewhat contrarian and different
1:55
take. And if you're right, then do
1:56
remember that he called this if wrong,
1:58
then don't let him forget it.
2:00
With that, let's get started.
2:02
Deepak, the narrative around India has
2:03
been very negative for I think a very
2:05
long time now. And I think in today's
2:07
episode, we wanted to discover have we
2:09
reached peak pessimism and are things
2:11
actually finally turning around or is it
2:14
like is the worst it's got so far?
2:17
Now, on that, I thought maybe we can
2:18
start by actually fleshing out the bear
2:20
case. So, can you almost steel man or
2:23
whatever or or flesh out what is the the
2:28
clear version of the negative scenario
2:30
that you can lay out for us?
2:32
Why is everyone so bearish on India
2:34
right now in your view?
2:36
>> So, Shay, I think the you know, the the
2:38
feeling or the narrative is bearish and
2:40
I I I don't disagree with the
2:43
data points that are being put out. Now,
2:44
let's put the bear case right here.
2:47
First bear case is the rupee has gone to
2:53
because you know, of a bunch of factors,
2:56
but then the rupee weakening means our
2:57
imports get more expensive. Our
3:00
crude oil, which is where we are
3:05
you know, adds pressure to the rupee
3:06
again because we have to keep importing
3:08
crude. Crude prices are going up because
3:11
of the Hamas war. India does not have
3:13
domestic crude resources of meaningful
3:15
India is importing gold like crazy. Did
3:17
the 72 billion of gold last year.
3:21
India doesn't produce any gold.
3:22
Therefore, we have to bring in gold from
3:25
outside. That's adding to pressure.
3:28
Third one is that FPIs, foreign
3:31
portfolio investors, are taking their
3:32
money out. They're taking their money
3:34
out in hordes. They've taken out I think
3:36
more than 250,000 crores in the last one
3:39
and a half years or so. They have
3:42
taken out more money than they've
3:45
perhaps the 2 years of 3 years before
3:47
that. And they have considerably changed
3:50
their view on India because India does
3:53
not have any AI. In fact, whatever
3:56
happened in AI is hurting our IT sector,
3:58
which is our biggest export.
4:00
Uh they and you know, it may take away a
4:02
lot of IT jobs, which could hurt our
4:04
economy. It could replace a lot of
4:08
uh so on. This is the bear case. And
4:09
then it's like, "Oh, yeah, AI comes, I
4:13
Uh there's an LPG shortage that's
4:14
happening because India does not have
4:16
enough LPG, or that's what the narrative
4:18
is, and it keeps going downwards,
4:20
saying, "Okay, foreigners prefer
4:22
investing in other countries, not in
4:24
India. India has adverse taxation for
4:27
foreigners compared to everybody else.
4:29
Uh India has uh issues domestically,
4:32
pollution, infrastructure, etc. India
4:35
also has a relatively limited government
4:37
space to spend. We do too much
4:39
subsidies. We do too little actual, you
4:42
know, capex-level investments. So,
4:46
uh a lot of our money, our taxes, go
4:48
towards paying for freebies, uh rather
4:50
than anything else. These are again
4:52
macro, you know, bear cases and all that
4:53
stuff. And then there is, of course, the
4:55
fact that even FDI, which was uh foreign
4:58
VCs and investors investing into Indian
5:02
are now seeing those startups list and
5:04
taking their money out.
5:06
it feels like there is a lot of
5:08
under-confidence in India. Inflation
5:10
will go up. You will hurt. You will
5:13
basically, why then invest in India at
5:15
all when you have all these headwinds in
5:17
front of you? And then, you know,
5:20
therefore, money is going out. Markets
5:22
are not going up. Our rupee is going
5:25
Our FPIs are exiting, and so on.
5:27
>> Yeah, I mean, the way it sounds is that
5:29
you should take all your money out of
5:30
India, uh put it in, I guess, Taiwan
5:32
because they make the chips, Korea
5:34
because they also make chips and memory,
5:36
uh maybe China because they seem to have
5:38
access to that earth, and the US where
5:39
all the innovation is happening,
5:40
apparently. You unfortunately made too
5:43
strong a bear case. This is very
5:45
compelling, and I don't think you've
5:46
said anything wrong at any point. I
5:47
mean, you have actually laid out what
5:49
seemed like facts. So, what am I missing
5:51
or what are we missing? Why are we
5:53
recording this episode? Are we all
5:54
doomed? Or do the pessimists have a
5:56
>> So, you know, see the my problem
6:00
I think perhaps I speak from a little
6:04
you know, too much gray hair is that
6:07
if I have seen these feelings before,
6:10
these feelings inspire me rather than
6:15
every other time in the past and I I say
6:17
this as a generic. I'm I'm saying okay,
6:18
yeah, you could say this time is
6:20
different, but let's look at all the
6:22
times in the past and I've been in the
6:24
or I've actually tracked the markets for
6:26
these particular times. I know it's
6:28
happened even earlier, but take 2002
6:31
perhaps or 2009 early 2009, 2013, a
6:38
>> 2020 when the when the COVID crisis
6:41
happened. 2022 when Ukraine happened as
6:42
well. These are all mini issues at which
6:45
India looked horrible. I'll give you an
6:47
example. In 2002, 2002 there was 9/11
6:50
that had happened the year earlier.
6:51
There were there was the Arthur Andersen
6:55
Enron scams and a bunch of the massive
6:58
IT bust that happened in the US which
7:01
apparently supposedly affected India.
7:03
But at the end of 2002 it looked
7:06
absolutely miserable for India. And you
7:10
interestingly I think Bharti Airtel had
7:12
gone IPO at just about that point into
7:14
that bear market and you know,
7:16
where were we? There was no meaningful
7:18
telecom at that point and and so on.
7:21
And then the markets went up 75% the
7:24
next year because as it turns out in the
7:26
end of 2002, the actual underlying data
7:29
was not as bad as the narrative.
7:31
It looked like oh, India would get
7:32
finished because again same IT bust,
7:34
what will companies outsource to India?
7:37
At that time the IT companies were
7:38
growing 30 to 40% per year.
7:42
And of course the dollar had
7:45
>> Was in a stable area for a few years.
7:47
>> that time and India's inflation was was
7:49
relatively under control. So the
7:52
narrative was negative, the markets were
7:54
weak, markets worldwide were weak, but
7:57
uh India's fundamentals were not bad at
8:00
all. Our IT industry was fledgling. It
8:02
was early early stages. I'm talking
8:04
about a few billion a year versus the
8:07
nearly 200 billion it does now.
8:09
Uh so in comparison we were
8:12
you know we were very very small. And
8:14
yet that that was the the the sectors
8:17
that were supposed to drive the market
8:20
which perhaps that time was early banks
8:22
and all that stuff. They all started to
8:23
recover and you could see that in the
8:26
data, but the narrative remained very
8:28
negative till end 2003. It was like we
8:30
were going up during a market that was
8:36
the the new cycle was very bearish
8:39
>> So like they didn't believe the market.
8:40
They were like this is just a matter of
8:44
>> A dead cat bounce or something.
8:45
>> Yes, dead cat bounce. In 2009, you know,
8:47
we had this global economic crisis and
8:49
>> But even there wasn't the
8:51
it was an American crisis, right? I mean
8:53
why why was India impacted?
8:54
>> So I mean India was impacted a little
8:56
bit downstream because we were very
8:57
dependent on foreign flows. At that time
8:59
foreign flows when if FIAs [laughter]
9:02
exited and they exited about 80,000
9:04
crores at that time which in comparison
9:06
with today's 240,000 crores is a fairly
9:08
large amount. And that just ruined the
9:10
market because they were the majority of
9:12
investors in the market. Domestic
9:13
investment was very little. So in
9:15
comparison if you saw mutual funds were
9:17
very small in India that time. They
9:19
weren't there was no SIP sahi hai mutual
9:22
fund sahi hai at all as a as a thought
9:24
process. So everything got wrecked and a
9:27
large amount of India's domestic market
9:29
was speculation in the futures and
9:31
options market even more than what we
9:33
see today and we complain about today.
9:35
In comparison with the size that time,
9:38
India was a much larger speculative
9:40
player, domestic India. So, you saw a
9:42
lot of people getting hurt and going
9:43
bankrupt during that time. And
9:46
therefore, when the recovery started to
9:48
happen after March of 2009, I remember
9:51
the feeling because I had just moved to
9:53
Delhi at that time and I was like
9:55
this is not going to last. But this is a
9:59
>> So, even you felt it this time.
9:59
>> felt it. I was And And this was This was
10:01
when, you know, it was really my
10:03
maybe a second or third real crisis.
10:05
There was a mid crisis in 2004 when
10:08
the government the left came into power.
10:10
The market crashed like
10:13
>> And then in 3 months it had recovered
10:15
back because, you know, they said the
10:17
left won't determine any policy. So, the
10:19
market kind of recovered. In 2006, there
10:22
was a 30% fall after a large IPO,
10:24
Reliance Power Reliance Petroleum, I
10:28
They were a very big IPO and then the
10:29
market crashed 30%, but in 3 months by
10:31
it was in April and by June the market
10:34
was down 30%, but by October it was back
10:37
at new all-time highs. So, I'd seen a
10:39
few of these mini crisis, but these mini
10:42
crises were, you know, at some point
10:45
existential saying, "Oh man, is
10:46
everything going to go down flames?" And
10:48
then it comes back up relatively fast.
10:50
So, 2008 was more sustained. It was
10:52
about 6 or 8 months. And that time
10:56
"Deepak, these narratives
10:58
will change very fast because news
11:00
travels faster." So, I didn't know
11:03
understand what he meant, but I think I
11:05
We've seen a lot of those crises after
11:06
that. 2013, the you know,
11:09
6 years of QE or 5 years of QE that
11:13
America has done has flooded the US
11:15
market and the world market with dollars
11:17
and currency. People have money. India
11:20
has a lot of money incoming from foreign
11:22
investors. Again, even at this time
11:24
Indian domestic investments are like
11:26
nothing in comparison with foreign
11:27
investors. They were, I think, 22% of
11:31
the Indian market by this time.
11:33
50% of Indian India has promoters, 22%
11:38
the remaining by all of our retail
11:41
investors plus corporates plus banks and
11:44
>> This is today or this was back then?
11:47
>> So, that at that time when there was a
11:50
talk of a taper tantrum, that a taper a
11:52
taper meaning that no, I will not
11:55
flood the market as much as I used to by
11:59
and reduce the amount of that I flood
12:01
the market with. This is what the US was
12:03
saying. And then the
12:05
emerging markets took a beating.
12:07
>> I remember this. It was actually quite
12:08
horrifying because I remember our
12:10
inflation was very high, the rupee
12:13
weakened even worse perhaps than it did
12:15
right now. It was quite alarming.
12:16
>> It was quite alarming because rupee went
12:18
from 55 57 to 68. So, that's about
12:22
nearly 20% fall in a matter of a few
12:28
changed the interest rates to
12:30
from overnight was about 7 or 8%. They
12:34
made it 12% overnight. The 10-year bond
12:37
went to 8 to 9%. Liquid funds lost money
12:41
which usually they don't do, right? So,
12:43
you you saw this period of craziness at
12:46
that time and it was like, what's
12:48
happening? I mean, the rupee is crashing
12:54
his terms came to an end. Raghuram Rajan
12:56
came in. He created the FCNR
12:59
loan thing and basically what he did was
13:02
increase [snorts] interest rates and
13:04
also increase interest rates from a repo
13:09
from a different standpoint. The instead
13:13
overnight rates to 12%, he made a
13:15
slightly different change in the
13:17
interest rate structure and he also
13:19
created this FCNR pool and
13:21
at that time it worked because US
13:23
interest rates were close to 0%.
13:25
India's interest rates were as I was
13:27
telling you 12% overnight and all that
13:29
stuff. So, the gap was wide enough that
13:31
if you provided a dollar hedge from the
13:34
RBI at a certain at a defined rate for 3
13:38
years, then Indian banks could offer
13:40
foreign currency hedged uh
13:45
exposure to deposits at say 8% or 7 and
13:49
1/2 or 8% uh effective rates. Well, for
13:52
them, I think for the dollar rate it was
13:53
effectively 6 and 1/2 or 7%. But,
13:55
getting 6 and 1/2 in almost
13:58
quasi-guaranteed dollar terms
14:00
>> When you got 0.25% in the US, I can see
14:03
why that worked and why it won't work
14:05
>> yeah. So, at that time, of course, the
14:06
numbers were smaller. I mean, we are
14:08
talking about it brought in maybe 20
14:10
billion or 30 billion.
14:11
>> And that was enough?
14:12
>> That was enough. It's just that India's
14:14
economy is much bigger now, right? So,
14:15
now now the prob- the But, that's what
14:18
>> But, so 2013, how long did that last?
14:20
was about between June and November.
14:23
>> Almost half a year.
14:24
>> Unexplainably, market started to go up
14:26
in December. And things were as bad. I
14:27
mean, according to me, it was like, "Oh,
14:28
the dollar is still heavy." And even
14:31
though it was good, it was getting
14:31
better. It had come from 68 to maybe 63.
14:34
And I was like, "Okay, this also sounds
14:38
you know, it was it was a miserable uh
14:40
stretch for a lot of people. And then I
14:43
was looking at the markets, and the
14:44
markets started to go up. And I was
14:46
const- Now, by this time, I've seen a
14:49
few. And then I'm like looking at this
14:51
"Peak pessimism is not a good idea." And
14:53
I at that time, I was just starting to
14:56
think about building Capitalmind, right?
14:57
So, I could actually say that, "Oh,
14:59
well, you know what? This is quite
15:03
uh there is perhaps something that we
15:05
can do." I actually started building out
15:07
the portfolio uh concept, investment
15:10
concept in the mid-caps, or thought
15:11
processes around them. And we could see
15:13
a lot of the ground data was actually uh
15:16
starting to emerge in a better way. The
15:18
point here was it was peak pessimism at
15:23
in the time of peak pessimism, I could
15:26
see markets going up. Uh which
15:30
>> And so this time you didn't disbelieve
15:31
>> I didn't disbelieve it. I was like,
15:32
okay, this is interesting because if
15:34
markets are going up when they're
15:35
climbing a wall of worry, if that may if
15:37
you may that's you know that So there
15:39
was some kind of pessimism overload even
15:42
in the news, even in the narratives all
15:44
the way till 2014 when the market hit a
15:47
new all-time high and then it's kind of
15:49
uh kept going from there.
15:51
2020, I think the world was in a crisis,
15:54
>> We weren't unique in that sense.
15:55
>> We weren't unique in that sense, but
15:56
then the you know, when the world was in
15:58
a crisis, they said India did worse than
16:00
everybody else. There was this article
16:01
>> Yeah, famous commentator.
16:03
>> famous commentator
16:04
>> on why I'm losing hope on India.
16:05
>> India, why I'm bullish I'm I no longer
16:08
have any hope for India. So it was
16:12
November 2020, India had cases but not
16:16
meaningful amounts of deaths in that
16:18
sense and the bigger crisis came in
16:21
>> us. The Delta wave.
16:22
>> The Delta wave. But
16:26
through the Delta wave
16:27
the markets actually went up.
16:29
And when we didn't have as much, markets
16:31
were going down, right? So
16:34
the bad news was on the ground, but the
16:36
the the the economic data was showing
16:38
otherwise and the core data was showing
16:40
otherwise and the stock markets were
16:42
going up. So interestingly, when you got
16:44
this peak pessimism case was usually
16:46
when the base So there are certain
16:47
commentators that if they start getting
16:50
headlines, I I look at it from a
16:52
perspective of the negative of the
16:53
Forbes cover, right?
16:55
It's like, oh, this is Yeah, correct. So
16:57
it's like if everybody says India is
16:59
bad, that's when my trigger things
17:01
saying, okay, okay, we're getting
17:03
somewhere here. And people I don't blame
17:06
the commentators. You know, there are
17:07
the same commentators who were there in
17:08
2002 and 2009, early 2009, 2013 who
17:13
would come on the forefront and be
17:16
interviewed on TV channels and all that
17:19
we want your views because otherwise
17:21
their views were useless when the
17:22
markets were going up and doing very
17:24
well. They would continue to be bearish.
17:26
And then you'd be like, these people are
17:28
waste to listen to because
17:30
I can't gain 100% and lose 30% from that
17:32
100%. And then this person keeps telling
17:35
me that my this country is you know
17:36
don't yeah. So, I would say
17:40
uh it's a sign. It's a it's a trigger
17:42
sign that says the narrative is
17:43
worsening. So, now it's time to check
17:47
It's happened in 2020, it's happened in
17:49
2022. In 2022, India was the opposite.
17:51
We were doing well economically as well.
17:54
When the world was reeling under the
17:56
Ukraine wars and first. Now, I remember
17:58
crude at that time went the same way. It
18:00
went to $130 a barrel.
18:04
>> We're not there yet actually.
18:06
>> We went to 100 and we we've come back.
18:09
We when we saw all of this happening and
18:12
now where are we? We're again in a
18:15
>> pessimism saying all of this stuff. I'll
18:16
interject over here that you know I
18:18
really felt this acutely because as you
18:21
been very focused on foreign and global
18:22
investing myself personally for for a
18:24
long time. But in August 2024, I had
18:27
held a like a sort of a a small token
18:30
position of well not that token or it's
18:32
reasonably sized position of Nasdaq 100
18:33
ETF through the Motilal Oswal product
18:35
for longest time. And at that point I
18:37
think it was in maybe August where there
18:39
were some briefly some yen carry trade
18:41
fears and everything had fallen quite
18:43
dramatically for a month and then it
18:44
sort of recovered. I remember always
18:46
being just ashamed of how badly that
18:48
small position was doing compared to
18:50
everyone else in India and literally out
18:52
of I would say guilt slash shame I I
18:55
just quietly exited saying man this has
18:57
been a terrible four five year
18:58
experiment I really need to let this go.
19:00
That really was the bottom of that so
19:02
>> Yeah, it's like the peak pessimism in
19:05
the US at that time right?
19:07
The global our global exposure at that
19:08
time. So, interestingly
19:12
it's at the opposite end the spectrum
19:14
right now. It says that it's NASDAQ or
19:16
nothing. And we are the nothing. And we
19:19
are the nothing when you can buy
19:21
anything else, but you don't buy India.
19:22
So, in that sense, there is this peak
19:24
feeling that is happening.
19:26
But I want to go one step further and I
19:28
want to say, "Listen, at that at each of
19:29
those times, the data was actually
19:31
looking positive." You know, the stock
19:33
markets were looking where it started to
19:37
you know, what what's the what's the
19:41
>> Yeah, so I think let me bring this to
19:42
the next phase of this.
19:44
I get it, but why do you feel we're at
19:46
the peak or the worst moment right now?
19:48
Because all the other signals you're
19:50
seeing, are you able to see some of them
19:51
now? And we will hold you to this, so
19:52
this will either make you famous or
19:54
infamous depending on how the next few
19:56
>> For the year ago.
19:57
>> All of this is at at some point
19:59
speculation. That's inside. But if I
20:01
look at the trajectory of crude, I'm
20:02
like, "Okay, where are we?" We went to
20:04
120 or something. We're crude oil this
20:12
It's at $90, a little bit less than $90
20:15
in in the market today.
20:16
The rupee has come back to some 95 odd
20:19
levels from the 97 levels that it
20:23
crude oil is primarily centered around
20:26
supply. So, there's a lot of supply that
20:28
has been blocked because of the Hamas
20:31
crisis, Iran, Israel, and US war.
20:34
And that crisis looks like people don't
20:37
want to deal with it anymore. Um
20:39
most importantly, last few days, if you
20:41
see the US bond yields, which had gone
20:44
uh 30-year bond yield has gone to 5.2%.
20:49
>> or at some point, right? This is crazy
20:51
for the US because every 0.5% increase
20:54
in that 10-year yield is a $200
21:00
>> That sounds absurd, but luckily the US
21:03
can just print money, so none of this
21:04
matters anyway, so yeah.
21:05
>> They don't currently they don't want to
21:07
because there's also inflation. They can
21:08
print money when there's no inflation,
21:10
but I think the Fed is also like dude,
21:11
if there's inflation I'm not printing.
21:14
>> Are you saying not everything is perfect
21:16
in the US right now? Is that what you're
21:18
>> We can talk [laughter] about that
21:19
separately, but there are issues that
21:21
where I think macroeconomically they've
21:23
had issues for a long time. And I again,
21:25
you know, all of these issues I talk
21:26
about about India, all the peak
21:29
are not new to India.
21:31
We've had issues like this in the past.
21:33
We've had a lot of these issues. It's
21:35
just that they're coming together in
21:37
some kind of a nicely strung unified
21:39
way, which one comp complicates the
21:42
other and the complicates the
21:43
>> When it rains it pours kind of
21:45
>> When it rains it pours kind of
21:45
situation. But because it is
21:50
The important thing is look at the data,
21:52
okay? The crude oil reversal has
21:53
happened. The rupee reversal is
21:55
happening in in it's happening in a very
21:58
slow way. But what's happening over
21:59
there is crude itself is is one part,
22:02
right? So, what do we do with crude? We
22:03
don't want another crisis. We've seen
22:06
Both the government and the private
22:08
sector like we need to change our
22:10
dependence because I can't have
22:12
Then, you know, so what are they what
22:14
are they doing? The the
22:16
there's some discovery of crude that
22:18
they're talking about. They're talking
22:20
exploration. India does have a lot of
22:24
that has to be explored. Now, it does
22:26
cost money to explore this. At $60 it
22:28
may not make a lot of sense. So, at some
22:30
point the government has to say,
22:31
"Listen, I will pay for some part of
22:33
this. So, you don't feel the damage if
22:36
crude goes back to 60, but I want to buy
22:38
that $60 oil from Indians rather than
22:41
from the Middle East and from other
22:43
places." So, that's going to happen. At
22:45
the same time private sector's like
22:46
listen, we got to expand beyond this.
22:48
So, our energy requirements whatever
22:49
they're linked to crude, we want to
22:51
delink. Maybe go to coal, which India
22:54
has. Maybe go to EV or electric
22:57
batteries and storage, which I I India's
23:00
working very strongly on
23:03
and that battery infrastructure with PLI
23:05
too and all that stuff will come back.
23:07
So, take a period of 3 years from now
23:09
our dependence on external crude will
23:11
probably come down not go up.
23:13
>> But at least as a percentage
23:14
>> As a percentage. Remember in 2008 crude
23:18
in 2008. India had to increase our
23:21
interest rates by 1% point at one point
23:24
because we thought inflation will be so
23:26
high. We were hugely dependent on crude
23:28
in the sense that it was a much larger
23:30
portion of our GDP than it is today and
23:32
there therefore we suffered for a while.
23:34
But today that crude oil differential is
23:38
not as bad. Even then they were
23:40
administered prices now also the prices
23:42
were controlled from for petrol and
23:43
diesel. But they've increased the prices
23:45
of petrol and diesel to some extent and
23:47
that's going to cause some kind of
23:49
inflation in the going ahead. But the
23:51
some of the crude oil pressures were
23:53
about whether the government is to take
23:54
a big hit. They have to take a little
23:56
bit of a lesser hit now that the prices
23:58
of petrol have gone up. But remember
24:00
they've gone up for the first time in 5
24:03
Which means if you increase the prices
24:05
by 10% but you increase it over a 5-year
24:08
period after 5 years, that means
24:10
actually 2% per year which is more
24:11
reasonable for me to understand and
24:13
take. But since it's a 5% at one point
24:15
or 10% at one point, I just feel more
24:20
This pain doesn't extend to a 3-year
24:22
forward phenomenon where most likely
24:23
crude will come back. But the situation
24:26
at almost like I said with the US
24:29
caused the US to back off
24:31
a little bit and has caused
24:34
>> Israel and Iran to kind of come to an
24:36
understanding that this war has to find
24:38
an end. And I think if it finds an end a
24:40
lot of the supply shortages, a lot of
24:42
the damage to prices, the prices that
24:45
were going up to March will come down
24:47
and will will get addressed. This
24:50
changes the narrative on crude
24:52
>> But that's just crude. That was just one
24:54
of like five factors, right?
24:55
>> So, let's take coal. Now coal there's
24:57
already been an appeal by the Prime
24:59
Minister to say don't buy gold. I don't
25:01
think that's going to happen. But it
25:02
didn't seem to work like uh unlike some
25:03
of his past appeals, this one didn't
25:04
land really. Yeah, it doesn't e- it's
25:06
not easy to tell Indians not to buy
25:08
gold, but it's actually possible for
25:10
people to monetize part of their gold
25:13
holdings. I mean, I could buy a lot of
25:14
gold because I feel richer or I want to
25:17
use it, right? But if I'm the user of
25:19
gold, there will be parts of gold that I
25:20
don't use quite as much. Now, a lot of
25:22
people do physically take their gold
25:25
exchange it and get new ornaments made.
25:28
Um typically, they lose 20 to 30% in
25:30
that exercise. So, there is a there is a
25:32
problem with gold that India desires to
25:35
use it, but India has 30,000 tons of
25:37
gold. We import 800 tons
25:40
uh of gold every year. Now, 800 tons is
25:42
a lot of gold to import because 800 tons
25:45
adds up to about I don't know I think
25:47
it's about a 72 billion or some some
25:50
number like that. A ton is about 1,600
25:54
crores. 1 ton of gold. So, 800 tons of
25:58
gold will be 14 lakh crores. That's a
26:02
Uh that's a lot of gold to pay for
26:03
imports. But then, there are two things
26:05
here or three, actually.
26:07
Uh let's look at the numbers. Uh
26:09
India has 800 imports 800 tons of gold a
26:12
year, but it has 30,000 tons. This is
26:14
more than I think the next five
26:15
countries put together or something some
26:17
crazy amount like that, right? So, there
26:19
is 30,000 gold tons of gold internally.
26:21
There is a potential way to get India to
26:24
recycle two or three percent of its gold
26:28
in the coming years internally. But more
26:30
importantly, even uh digital gold and
26:34
they also import gold from outside and
26:36
store it in their vaults. They are not
26:38
allowed to lend it out for whatever
26:40
Now, I would say this part can be fixed.
26:43
>> So, oil and gold I I I think those were
26:45
fairly persuasive. In a sense, almost
26:47
desperate times will call for desperate
26:49
measures, and this is something we can
26:50
fix. But now, let's talk about Indian
26:52
industry. It feels that we're sort of in
26:53
the industries of the past. And do you
26:56
see that? Do you see that in maybe our
26:57
profit growth or our I mean, maybe not
27:00
moving this also a little bit towards
27:01
markets as well. Um when you look at our
27:03
companies, do you feel we're we're
27:05
basically behind the times and all
27:07
innovation is happening worldwide and
27:09
we're stuck with industries of the past
27:10
or do you see our companies continuing
27:11
to do well in some ways at least and
27:13
some of those results percolating into
27:15
>> Super. Okay, this is now this is where I
27:18
forget the crude and gold. I can't have
27:19
we can't have any major import on that.
27:21
We we control on that as us as industry.
27:25
As as industry, are we doing well? Uh
27:27
the answer to some part of it is there's
27:30
some earnings growth visibility.
27:31
December quarter was already showing
27:35
March quarter is showing amazing signs.
27:38
the Nifty 500 results.
27:40
>> So far, you could have fooled me because
27:42
I don't [laughter] feel it. But it
27:43
>> I mean, it's it doesn't feel like it,
27:45
but it's interesting that the median
27:47
profit growth of Nifty 500 is like 17%.
27:51
>> That's quite high, actually.
27:52
>> That's ridiculous. I mean, some part of
27:54
it may be a base effect and all that
27:55
stuff, but it is very high compared to
27:58
what it was in the past.
28:00
Uh the commentary that's coming is
28:02
demand is there. Supply, there are some
28:04
issues here and there, but they will get
28:08
almost every industrial seems to be
28:11
doing well, really well. They're seeing
28:14
an increase in orders and so on. Uh the
28:16
government itself has after 2022 changed
28:19
its mind about Indian um
28:22
uh dependence on foreign uh
28:25
uh imports of goods, normal goods. Now,
28:27
when it says mobile semiconductors and
28:32
electric vehicles, batteries, and cells,
28:35
and technology, and so on.
28:36
India has now started the effort of
28:38
saying, "Listen, we need to reduce this.
28:40
We need to substitute imports by
28:42
manufacturing domestically. So, I want
28:44
to promote the manufacture of stuff
28:46
domestically." What have we done this in
28:48
and we've done this in cars and we've
28:49
become reasonably good now. Some of our
28:51
cars are actually quite good
28:53
domestically manufactured cars. We are
28:54
one of the few countries in the world to
28:56
actually have a decent car industry.
28:58
>> Most people have just given up to China.
29:00
>> They've given up to China, Korea,
29:02
uh Europe and US. Even the US has given
29:05
up for the most part. Except in the US
29:06
you find those cars a lot more than
29:09
anywhere else. But the same thing with
29:11
India. India Indian cars are very
29:12
popular in India and we promoted that
29:14
industry and it's taken us a long time
29:16
but it's kind of come through. We have
29:17
to think like that going forward even
29:19
for all the other industries. We need
29:21
rare earths. India has a lot of rare
29:23
earths. We have We don't have the mining
29:24
and refining technology. We need to get
29:27
it or we need to build it. We need to
29:29
build the research. We need to do the
29:31
work. We need to refine the stuff
29:33
Uh like the Vedanta chief said,
29:36
give it to people who want to do it.
29:38
They will find a way to do it.
29:40
Uh we don't make semiconductors. We've
29:42
started to make semiconductors and it's
29:44
already come from the low end to the mid
29:45
end. That means we're working with
29:47
companies like ASML to say give us the
29:49
machines, we'll do it. They might give
29:50
us lower end machines but at least if
29:52
you were to manufacture lower end
29:55
we could replace a lot of imports that
29:58
come into the cars. The semiconductors
30:00
are manufactured in China. We could
30:02
There is a lot of work that's happening
30:04
around this front but the core data
30:07
shows positive growth, not negative. In
30:11
>> is it just profits which could be like
30:12
perhaps as you said base effect or
30:14
something like What do you see in terms
30:15
of I don't know capex or in terms of
30:17
credit growth? How are those going?
30:18
>> Yeah, so capex and credit growth are
30:19
linked, right? So industry in India
30:21
didn't do capex at all since between
30:28
uh actually started off because of the
30:30
Indian bankruptcy code.
30:32
Now, the typical idea in India was large
30:34
industrial families would take loans
30:36
from banks and then default on them,
30:38
then go to the bank and say let's do
30:39
settlement, DRT, etc., etc. The bank
30:42
would take the hit and give another loan
30:45
to the company to pay back half of its
30:47
earlier loan, write off the other half,
30:50
This is very standard. By the way, this
30:52
is also how a lot of farmer loans
30:54
operate. Uh when farmers realize there's
30:56
a farm loan waiver coming, everybody
30:57
stops paying their loans so that they
30:59
can settle when the government will pay
31:00
their loans instead, and then they get
31:02
more loans and move on.
31:03
>> Okay, but you you feel differently when
31:05
the farmers do it and when the when some
31:06
large industrial group does it.
31:08
>> right? So, because we just feel that
31:09
rich industry shouldn't do it. Poor
31:11
farmers, who are actually some of them
31:12
are quite rich, do it, it's fine. But,
31:15
I'm not going to get political about
31:15
this. I'm just saying that this was the
31:17
phenomenon done earlier. Um
31:21
However, in with the bankruptcy act,
31:23
what started to happen, and it happened
31:29
uh Tata Steel first acquiring um
31:31
>> One of those Bhushan entities.
31:32
>> Bhushan Steel, yeah, I think. And
31:34
Bhushan there was a comes from a again a
31:37
rich industrial family where they didn't
31:39
think that this would actually go
31:40
through, but the bankruptcy said, "We
31:42
are Yes, you can repay only half of your
31:46
But, you lose the company. We're going
31:47
to sell it to somebody else."
31:49
>> And it actually happened.
31:50
>> And actually happened. So,
31:51
>> So, but it should have been bullish for
31:54
>> So, it was bearish because suddenly all
31:56
companies which had borrowed, and they
31:58
expected to get a little bit of these
32:00
write-offs, suddenly said, "Dude, dude,
32:02
just pay back the loan. These banks will
32:03
come and take over our companies."
32:05
>> So, it was like a reset of
32:06
>> a reset. So, they said, "We won't do
32:07
capex." And a lot of this capex was
32:09
duplicated. So, in the sense of if I
32:12
wanted 100 crore, I'll borrow 200, I'll
32:14
only spend 100, I'll siphon off the
32:18
um you know, uh the I'll I'll make the
32:21
So, I the real capex I'll pay, the
32:23
remaining I'll this thing. And banks
32:25
themselves were very aware that this was
32:26
happening. They would do stunts to kind
32:31
>> They all had some understanding.
32:33
There was an understanding. All of this
32:34
stuff went away. Banks were loath to
32:37
lend to capex in the first place.
32:39
Corporates that were good were saying,
32:41
"I'm not doing any more capex. I'm done.
32:44
I want to be zero debt. I want to be
32:45
this. I want to be Even the good I mean,
32:47
I'm not saying there there are some bad
32:48
corporates, some good corporates. The
32:50
bad corporates were like, "Listen, we
32:52
don't want to do this anymore. I don't
32:53
want to lose the company for the sake of
32:55
>> about corporates who who aren't going to
32:57
default on this anyway?
32:57
>> Yeah, they were like, "Listen, if you go
32:59
to the banks, they're going to lump us
33:01
in with the bad guys anyway."
33:03
>> So, it was just a era of mistrust.
33:05
>> Or in a new environment.
33:06
>> And and people were like, "Listen, IBC
33:08
thing can be hurtful because anyone can
33:10
put a claim anytime, and then they could
33:13
take your company through bankruptcy."
33:14
It took a lot of time for the law to get
33:16
established saying, "Listen, frivolous."
33:20
did not go up across the industry. One
33:22
what is one com company's capex was
33:24
another company's drop in capex and so
33:28
It is now, suddenly, that capex seems to
33:31
have risen quite dramatically. It may be
33:33
linked to the other changes we're
33:34
talking about where the government is
33:36
pushing people to do PLI, data centers
33:38
are appearing in India, and so on.
33:40
All of these things have changed the
33:43
nature of capex completely. India's got
33:49
That breakthrough is going to require us
33:50
to build at least maybe five or six more
33:52
nuclear plants, nuclear size
33:57
next few years. That has increased capex
34:01
in one area. There is semiconductors.
34:05
differentiation in cars. A lot of this
34:07
for domestic usage. I'm not even saying
34:09
for export. Just replace domestic usage,
34:11
and you should be in better shape.
34:14
All of this is happening at the same
34:15
time. And how does it reflect in data?
34:17
You look at bank credit growth to
34:25
It grew 15% year on year
34:27
as measured in 2013.
34:31
It went to 0% even negative after that.
34:34
That means it kept going down in terms
34:35
of growth. And then now it has finally
34:38
come back to 16% as of March 2026.
34:43
CAPEX growth is increasing and therefore
34:45
credit growth is increasing because
34:46
people are funding this CAPEX through
34:52
And because you can see it in
34:53
industrials, I think that is one very
34:55
important sign. Even the personal
34:59
loan credit. That means you and me
35:02
taking loans for housing or for for
35:05
personal loans or for businesses or for,
35:07
you know, a loan against securities and
35:08
all of that stuff. Even that is growing
35:11
now finally after 2 years after
35:14
RBI clamped down on the sector quite,
35:16
you know, strongly in 2024. And then for
35:19
for a year we saw credit growth even in
35:22
the personal area for personal loans go
35:24
to zero. And then because there haven't
35:26
been that many defaults, RBI's eased up
35:28
on this. And then now we're back up to
35:32
If you consider credit as one
35:34
early stage indicator of India
35:38
showing signs of recovery,
35:40
then credit is coming back.
35:42
>> So both CAPEX and credit you you have
35:44
enough positive narratives to indicate
35:46
that things are in a sense turning
35:48
around and and it's already happened. We
35:50
just don't believe it yet.
35:52
Now maybe I thought I'd bring this
35:53
unless there's anything else that I've
35:54
been forgetting. I thought I'd try try
35:57
investors because so far, you know,
35:58
we've been talking macro. There's oil,
36:00
there's gold, there's credit growth and
36:02
so on. But most of us, especially the
36:04
people listening to this podcast, while
36:06
this is all very interesting and useful,
36:07
the fact is we look at stocks or we look
36:10
at mutual funds or maybe we look at some
36:11
debt funds or something like that. And
36:13
over there we've been in a couple of
36:15
years of I think at best flat to low
36:18
single digit returns and at worst if
36:20
you've been in the wrong strategy,
36:21
negative 10, negative 20, who knows how
36:23
bad it could have gone depending on
36:24
where you were stuck. Um
36:26
so on that do even see some beginnings
36:29
of green shoots in the stock market?
36:30
>> Like yes, like remember all those other
36:32
episodes where you're like, "It has
36:33
started to go up." but everyone was
36:34
like, "Oh, don't take this seriously."
36:35
>> Yes, yeah. I I know, you know, it's
36:38
Let me take two areas where I think
36:40
India has gotten a beating. One is the
36:48
the AI kind of a issue. Well, AI they
36:51
said, "Okay, let's start with AI."
36:54
I don't dwell too much on it. There are
36:55
too many people writing so many things.
36:57
>> I I I can't I don't think I could stand
36:58
to listen to another take on AI.
37:00
>> No, you know, every morning you come and
37:02
today I hear that the AI tools that
37:05
people are using are suddenly refusing
37:06
to do work. Because the training
37:09
they're they've been trained to say,
37:10
"I'm sorry, I you're not supposed to
37:13
I'm like, "Dude, I wanted If I wanted
37:16
you know, I have enough
37:18
>> I but again, I'm starting to mute this
37:20
on all my immediate devices, but anyway,
37:21
so leaving aside the
37:24
>> But the AI's problem with AI was A,
37:25
India didn't have much AI,
37:27
and B, India was going to lose jobs to
37:31
I think both of these assumptions are
37:34
Every technology takes away some jobs,
37:41
you know, the typewriter industry that
37:44
would have been destroyed by computers.
37:46
Yes, sure, you sold some lesser
37:47
typewriters, but you sold you got people
37:49
who could type. Continue to type on a
37:51
different framework, you know,
37:53
something. A different skill.
37:55
But when you had an STD booth for mobile
37:58
phones, those got people got wiped out,
38:01
the people who owned STD booths. But now
38:03
they sell some other stuff while people
38:05
use mobile phones for everything. You
38:07
can't make You can't pay someone to make
38:09
a phone call anymore.
38:11
>> But now I I really need you to bring
38:12
this back to market because I'm getting
38:14
>> What happens over here is that if you if
38:17
you think of AI as not having a negative
38:19
on it, and there is a positivity to
38:22
maybe more work coming along. The fear
38:24
on this IT companies destroying
38:27
themselves because of AI is no longer
38:29
valid or isn't valid in the long term.
38:31
That has one thing. Second, our FMCG
38:33
companies got hit because they said AI
38:35
is going to reduce jobs. So, well, you
38:37
know what? That impact is not there. So,
38:38
I'm saying downstream, if you look at
38:40
the AI part of it, second order effects,
38:42
it's not as bad as it was. Uh Intel,
38:45
too, as as we've seen. But at some point
38:49
there will be the next gen of players
38:51
that will sit on AI, many of whom may be
38:54
in India just because India has the
38:56
enterprise to build those companies. A
38:58
lot of companies in India are doing
39:00
routing for AI and a bunch of security
39:02
features and all that stuff. But there's
39:04
also a lot of next gen companies that
39:06
are being built here that may take place
39:08
in the next 5 or 6 years. So, I don't
39:10
think we will lose out on the AI game.
39:12
Uh from the listed market, these guys
39:14
may still take some time. But you will
39:16
find that there will be usage uh based
39:19
Now, the markets itself,
39:22
if they've taken these negatives and the
39:23
FPIs have taken these negatives and
39:25
suddenly find that the narrative that
39:27
India is zero on AI is maybe two on AI
39:30
out of 10. That itself brings in some
39:33
investment going forward. There's a
39:35
peculiar concept in FDI as well.
39:37
FDI is essentially what foreign
39:39
investors uh have invested in unlisted
39:42
companies. So, uh Swiggy, Zomato, etc.
39:44
When they were fledgling companies, got
39:47
investments from abroad. Those companies
39:50
Now, these are VCs. The VC structure
39:53
says you don't get to behave like a fund
39:56
that can repeat its investments. That
39:59
means if you sell something, you have to
40:01
give the money back to the investor. You
40:02
make your 20 investments, whatever makes
40:04
money, take the money out, give it back
40:06
to the investor. He gives you new money,
40:08
you create a new fund, and you do on go
40:10
>> Well, it generally takes long enough
40:11
anyway, so thank god.
40:12
>> Yeah, that's that's that's the way
40:13
they've structured. But it's not like
40:14
us, as a mutual fund, if I sell one
40:16
stock, I can use the money and buy
40:18
another stock. That's perfectly fine. I
40:19
I don't have to return the money to the
40:21
investor itself, right? So, when they
40:23
these companies list, so whether it is
40:27
small company or a big company, when
40:28
they list in the market, these VCs have
40:30
to go to the market and say, "Whatever
40:32
money whatever I can take out, let me
40:34
take out. I have to give it back to my
40:35
investors." My investors then have a
40:37
timed phase lag between them investing
40:39
into back that money into India. Maybe
40:42
there's a negative sentiment right now,
40:44
This also the fact that interest rates
40:46
are high in the US, which means that
40:48
people who investing in fixed income can
40:50
make a slightly higher return. So, to
40:51
that extent, I think there is some
40:54
pension funds and all that who said,
40:56
"Take out our riskiest investments and
40:58
invest them back into fixed income,
40:59
because I don't need the extremely high
41:01
returns from emerging markets. I can use
41:04
them in US government bonds instead."
41:06
So, they've changed the mix somewhat,
41:09
but I think all of this is going to
41:12
this will take longer from our interest
41:14
rate perspective, but I think overall,
41:16
you'll see that as time goes by, these
41:19
FPI reversals in terms of bringing back
41:22
that investment and reinvesting into
41:24
India will happen over a course of time,
41:27
especially after if there is a
41:31
I won't say AI bubble burst, but I will
41:33
just say slowdown of growth
41:36
in the AI infrastructure that is
41:38
currently being done in AI abroad. So, I
41:41
think some of that money will get here.
41:42
Look at So, markets then benefit from
41:44
liquidity that says the foreign
41:46
investors don't go out
41:47
as much. Rupee benefits in some way
41:50
because again, of these reversals. The
41:53
market is already showing signs of
41:55
earnings, and then we're seeing an
41:59
you know, domestic investment, domestic
42:02
industrialization, and so on. So,
42:03
there's a downstream impact. Now, don't
42:06
think of any of this as this is May.
42:08
This will happen in June. I think you
42:10
should think of 2026 versus 2030. How do
42:12
we go from here to there? I think that
42:15
is the thing that picture that we're
42:17
missing. That's peak It was peak
42:18
optimism 2 years ago. There was nothing
42:21
>> You had India plus China plus one
42:24
>> China plus two also if in some cases.
42:26
Goldilocks economy. The words were, you
42:28
know, flowing out of that time. And like
42:31
you said in October 2024, the US was
42:34
underperforming India by a large extent.
42:36
So, to to that extent, it sounded like
42:39
India was the best thing to be and
42:41
nowhere else was the best thing to be or
42:44
Now, the tables have turned. Korea's P/E
42:46
of 4 has gone to P/E of 8 and they've
42:48
doubled and Taiwan has gone up and you
42:50
know, and Japan has gone up. Suddenly,
42:52
you find that, oh, there's everything
42:54
but India. I think both these views are
42:56
wrong. The truth is always somewhere in
42:58
between. So, it makes sense to invest
43:01
into Indian markets during a period of
43:03
pessimism understanding that all of
43:05
these stuff I talked about will take you
43:08
But over a 4-year period or 5-year
43:10
period, you're probably going to see the
43:12
benefits of whatever is
43:14
we're doing to fix what's happening
43:17
>> Okay. So, like as Ritesh Sharma says
43:19
every time he comes on the stage, um
43:22
India manages to disappoint both the
43:23
optimists and the pessimists at all
43:25
times. So, that's completely understood
43:26
and taken. I have two areas I'd like to
43:28
stay at and maybe I'll I'll move on to
43:31
uh for people as they're looking to
43:34
The first one, Deepak, is, you know, a
43:35
lot of people have from India have in
43:37
this time been talking about the
43:38
importance of foreign investments.
43:40
They've set up like either they have
43:41
something in GIFT City or they're
43:42
saying, "No, I don't have anything, but
43:43
you should still do this." And I can
43:44
maybe give you advice or or
43:47
you can I can give you some ideas of
43:51
It's done well so far. I'll go as far as
43:53
to say that, you know, even last night I
43:55
I I had to wake up in this this morning.
43:56
I was like, "Is this Is this a typo?"
43:58
But apparently, Dell is up 40% after
44:00
hours after already being up some 100%
44:02
in the last year. So, the momentum there
44:04
hasn't abated there yet, if I may put it
44:06
that way. So, how do you feel about
44:08
people who are like, "Look, this was a
44:10
wake-up call. I can't have all my money
44:11
in India. I should have money abroad and
44:13
these these noble souls are helping me
44:15
with my journey abroad, whoever they
44:17
might be on Twitter or things. Let me go
44:19
and listen to them and
44:20
hopefully invest some money abroad. How
44:21
is that going to go?"
44:22
>> No, this is actually
44:24
I think also recommend. We've been
44:26
talking about this since what, 2016,
44:28
2017? Where we said so many of our
44:33
our investors themselves should have
44:35
some kind of a foreign exposure. We've
44:37
had the Nasdaq 100 ETF even the PMS for
44:39
a while. We've actually done
44:43
you know, talk to our customers and
44:44
said, you know, 5 or 10% of your
44:46
investment should be non-India. One of
44:49
the reasons why it should be non-India
44:51
is just for the diversification and the
44:53
fact that you might need dollars when
44:55
let's say your kids grow up and maybe
44:57
they go to a college abroad and and so
45:00
However, it's overdoing it to a point
45:03
where, "Oh, I should take all my money
45:05
out of out of India. I should take a
45:07
significant chunk of my money out of
45:09
India. I should then if I take 10% out
45:11
of India, then 90% is India. If India
45:14
hurts, my 90% of me hurts, but I can
45:17
then I if I go around telling everybody,
45:19
"My 10% is is doing great." That part is
45:22
also incongruous by saying that's the
45:25
only thing that I have, right?
45:27
>> It's like when you only look at the one
45:29
profitable stock in your otherwise bad
45:31
>> Yeah, so it doesn't really but I think
45:33
you should have a diversified portfolio
45:35
precise point that at some point you'll
45:38
mix. There are some issues here that you
45:41
know, there is an LRS limit and you
45:44
know, those limits may change. There is
45:46
a taxation on every LRS thing that you
45:50
but you invest out when the dollar is at
45:53
95 and your investment abroad is exactly
45:56
the same and the rupee comes back
45:59
>> to say 85 or something.
46:00
>> 85 or so because rupee is there is a
46:02
there is a measure called the REER. I
46:05
don't believe in it because I think it
46:07
undervalues the rupee. But because the
46:10
complexity in this is
46:12
REER is a merchandise trade weighted
46:15
average of all our all all
46:19
all trade between different currencies
46:22
countries and our relative inflation
46:25
with those countries. Now when you do
46:27
merchandise trade we are heavily
46:30
We have some US but China is our
46:33
biggest. So our relative inflation with
46:34
China determines where our thing is. And
46:36
China has a controlled you know
46:39
exchange rate economy. However
46:45
has a significantly higher services
46:47
trade with the US. So if you use that
46:49
India's India's relative inflation with
46:51
the US is much lower. In fact India's
46:54
inflation is in fact lower than the US
46:57
So technically we should be appreciating
46:59
if you look at just inflation. But I'm
47:01
just saying that this REER undervalues
47:03
the rupee. The REER was 105 106 which to
47:06
me was not a problem. But today the REER
47:08
itself is at 90. And that also according
47:11
to me undervalues the rupee. So
47:13
that itself says that we are 10% below
47:16
below what it should be.
47:17
>> So it should it could go from 96 to 87
47:21
>> If you get that right we are going to be
47:22
in this segment again.
47:23
>> No but then it takes some time. Some
47:25
time it takes a year year. These are
47:26
macro pain dry watching and all that
47:32
if that happens you lose 10% in rupee
47:35
terms. It will be the same in dollar
47:37
terms. But if you will be 10% down in
47:39
rupee terms and that is a 10% loss. That
47:43
>> Which is right now you are having the
47:44
opposite. If you had any dollars abroad
47:46
you are seeing it the rupee value go up
47:48
partly because of the well just the
47:50
>> Second thing is what if there is a
47:52
return of Indian people person something
47:55
happens where India goes up
48:00
because it's at a relatively lower
48:02
number and we're in the early stages of
48:04
where we are, but wherever if the
48:08
in the next 1 year or 2 years, you might
48:10
find that the Indian change in
48:13
stock prices could be higher than what
48:16
is happening abroad. The second one is
48:19
let's say this B part of this thing
48:23
what if the US markets or the world
48:26
markets don't return as much. There are
48:28
lots of reasons why and
48:29
macroeconomically you could argue either
48:31
ways. But, there are lots of things like
48:34
US bond yields being very high, has a
48:36
deficit. All of these countries have
48:38
>> infinite money printing machine might
48:39
one day face constraints.
48:41
>> might be finite, yes.
48:42
>> All right, Deepak. Here's my closing
48:44
question. Let's say someone has made it
48:45
through to the end of this podcast.
48:46
They've listened to it. At some level
48:48
this is also very prescriptive of things
48:50
Now, let's look at again your own
48:52
portfolio. If you have There are a lot
48:54
of people I know customers in our PMS
48:56
and maybe I guess to some extent
48:57
customers of our mutual fund as well who
48:59
have cash on the sidelines, who got it
49:01
over last years, have saved it, and
49:03
haven't deployed it yet.
49:05
Is now a good time for them to deploy?
49:07
Should they do equities? Should they do
49:10
In equity should do small cap, mid cap,
49:12
large cap? How would you ask them to
49:13
think about this to the extent when
49:15
they're making their
49:16
further decisions of you know, I think
49:18
this has further to go.
49:19
Or if someone is right now is thinking
49:21
maybe I should do some LRS. How should
49:23
they think about it?
49:23
>> Yeah, I think I mean see the LRS thing
49:25
is a question that I think everybody
49:26
will have at some point, but I say think
49:29
about it as a systematic investment
49:30
rather than a lump sum. That you can do
49:32
this over a period of time, but that
49:34
10-20% of portfolio is where I would say
49:37
do it because there are complexities in
49:40
investing abroad, tax differentials, all
49:43
sorts of things that happen. But, on the
49:45
at the same time I think now when you
49:46
have a lot of cash, your portfolio is
49:48
let's say 50 rupees investment, 50
49:50
rupees cash or say 75 rupees investment
49:54
That 75 rupees let's say all of it was
49:57
or rather half of it was in equity. You
49:59
wanted yourself to have a 50-50
50:05
in equity, 37 odd in debt and 25 in
50:08
>> That's a lot of debt in this example.
50:10
>> yeah. Yes, so I mean assuming that 50-50
50:12
is where it is. But if you just want to
50:14
bring back yourself to 50% you would
50:16
actually have to invest
50:19
half of this money again into equity,
50:21
half of this money again into debt. But
50:22
let's say you decided to invest a
50:25
I don't know, it's maybe 10 lakh rupees
50:28
that you've saved. You want to invest it
50:30
in equity to get your equity and debt
50:32
allocation to some level.
50:34
That 10 lakhs should not go in at one
50:36
point because we know all of these
50:38
problems that we just mentioned are not
50:39
going away tomorrow. This is not the
50:41
bottom. This is peak pessimism, but it
50:43
may not be bottom. The peak pessimism
50:45
phase can last three or four months.
50:47
You can narratives can get worse.
50:50
These particular commentators can be on
50:54
There is a lot more that can happen and
50:56
we've seen that optimism can also go to
50:59
crazy extremes. We saw in the US that at
51:01
some point the market actually nearly
51:03
doubled before it fell.
51:05
>> In the '99 situation.
51:06
>> '99 situation because people kept saying
51:08
that the market will go down and the
51:10
market doubled before it fell.
51:16
unfortunate part about uh
51:19
>> not being able to predict those
51:20
>> You can't time it with precision.
51:22
>> So I would say therefore I don't have a
51:23
correct answer on now, tomorrow, later.
51:26
I just say keep at it.
51:28
Uh things could get worse, but I see the
51:32
next four years as very big positives.
51:34
So regardless of when you invest now, I
51:37
think four years later returns should be
51:40
commensurate to the greater economic
51:42
growth that we will see. So I you will
51:43
be fine over that period of time. And
51:45
the reason I'm saying that invest
51:47
in a phased manner is because
51:50
I said peak pessimism when market prices
51:53
were going up. Market prices are not yet
51:56
>> But they're not going down either.
51:57
>> going down. But I I'll give you that.
51:59
But they're starting. They're showing
52:00
signs. They're saying, "Okay, maybe or
52:02
no no. Maybe or no no." So, that's what
52:04
they're doing right now.
52:06
>> So, we're testing the bottom.
52:07
>> a point when the market hits a new
52:10
And it will seem at that time
52:12
that come on, how can our markets be
52:14
hitting an all-time high when
52:15
>> This will just collapse the next week.
52:17
>> This is another big trigger. This is my
52:21
last trigger, at which point I say that
52:23
at that point I'm confident that things
52:29
And I feel that, you know, even at that
52:31
time it's like a phased investment. By
52:32
the way, we did hit close to an all-time
52:35
high in January this year. And then we
52:37
got the Ukraine the Iran war in
52:39
>> And back to where we're back down. If we
52:41
hit it again, and I think that's when
52:43
we'll I'll get more confidence that this
52:45
is actually peak pessimism at a time
52:47
when market prices are going up. So,
52:49
since that is ahead of us, that's why I
52:51
say invest in phases. I think
52:54
that when that does come, then you'll
52:56
get yourself use it as a trigger point
52:58
to say, "I'm on the right track. At
53:00
least I've invested on in the in the in
53:01
the in the right track." I would say
53:03
that is the point that you want to play.
53:06
The type of fund, large, mid, small,
53:09
>> Is there any pattern from previous
53:10
crisis or something special this time
53:11
because of the level of I don't know,
53:13
capex or something we've had?
53:14
>> So, I think capex means typically that
53:16
the largest companies will do better,
53:18
but it also means that
53:20
the absolute number is better. That
53:23
doesn't mean that the smaller companies
53:24
will grow at a smaller percentage rate.
53:27
So, it's like if a 10 crore company
53:28
doubles, it becomes 20 crores. If a 100
53:31
crore company grows at 30%, it's at 130
53:36
crores. So, the 30 crore differential is
53:38
much larger than the 10 crore
53:39
differential in the small company. But
53:41
you've got 100% return in one versus a
53:43
30% return in the other, right? So, the
53:44
percentage gain could be greater if you
53:47
invest in a more diversified portfolio
53:50
that contains both large, mid, and
53:55
>> do flexi caps or do all of them?
53:57
>> Yeah, we have a flexi. So, I mean, in
53:59
that sense, we do have
54:01
>> this your fund manager's problem, not
54:03
>> manager's [laughter] problem. And then,
54:05
uh if you don't even know whether to
54:06
invest in equity, debt, or commodities,
54:09
then go to a multi-asset or or spread
54:11
your, you know, wings that way. I would
54:12
say the actual instru- instrument to
54:15
invest in should be as broadly
54:17
diversified as possible.
54:19
If in the equity universe, then the
54:21
flexi cap is the most diversified. If
54:22
it's across the market, a multi-asset
54:25
makes more sense. But, that is your
54:27
typical I don't want to have to think
54:29
before I invest in. I wish Indian mutual
54:32
funds could invest abroad much more
54:34
easily than we could give international
54:35
diversification, but there are limits
54:37
right now. So, those thing investments
54:39
you may have personally at separate on a
54:41
separate basis. But, understand there
54:43
that you have these three or four things
54:45
that can provide that whammy that takes
54:48
away from your returns in the next three
54:49
four years. But, that's fine because
54:51
you've gone in there for
54:54
>> All right. Fair. All right, Deepak. So,
54:55
I'm curious to see how this episode
54:57
ages, whether we really did catch the
54:59
the worst of peak pessimism or if the
55:01
worst is ahead of us. So, we're going to
55:03
find out soon enough. And
55:05
we'll hold you to it, right? Thank you.
55:07
Well, that's our show. I think like me,
55:10
you're probably curious to see whether
55:11
we've timed this one right. Is this
55:12
truly the moment of peak pessimism and
55:14
things are going to turn around or is
55:16
the worst still yet to come?
55:18
But, either way, if you're looking at
55:19
your Indian investments more seriously
55:21
and are figuring whether you'd like to
55:22
add more to it, then I think there's two
55:23
ways we can help you. If you have more
55:25
than 50 lakhs and then looking to
55:27
invest, we have our PMS,
55:28
capitalmindwealth.com,
55:31
where we can invest your money in Indian
55:33
and eventually global stocks and
55:34
securities. And we have our mutual fund.
55:37
So, if you'd like to get into our
55:37
flexicap fund, a multi-asset fund, and
55:40
maybe outsource the decision-making and
55:41
even the taxes to someone else, then you
55:43
can go to capitalmindmf.com
55:46
uh and take advantage of a much smaller
55:47
ticket size to participate.
55:49
So, with that, see you next time and
55:53
>> Mutual fund investments are subject to
55:54
market risks. Read all scheme-related
55:56
documents carefully.
