"Emerging markets (EM) face structural challenges with limited inflows globally, aside from periodic cycles. India remains the most promising EM for long-term investment," said Arindam Mandal, the Head of Global Equities at Marcellus Investment Managers in an interview to Moneycontrol.
According to him, excluding India, the rest of the EMs struggle with the consistent earnings growth needed for steady capital flows.
After weak September quarter numbers, he believes earnings risk is likely to persist into the December quarter. So far, "we’ve seen no concrete indicators of improvement, aside from “hope”," said Arindam with more than 14 years of experience in investment management.
Where would you allocate your money (among sectors) after Donald Trump's win in the US elections?
Trump is seen as pro-cyclical and pro-growth, so it’s no surprise that his win sparked a rally in sectors like Industrials, Financials, Materials, and Metals—just like in 2016. But once the dust settles, markets tend to focus on companies with real earnings surprise potential. In 2017, this meant high-quality cyclical and growth stocks took the lead.
This time, though, the setup is different. Trump’s win wasn’t as unexpected, and bond yields have already risen by ~70 bps since September (even before the Election—which probably indicated some expectation of a Trump win baked in), which has boosted inflation-sensitive assets like Financials.
We are bottom-up stock pickers. But from the top down if we look at the US market, it has now split into three distinct groups:
>>> Group 1 - “Have It All”: High-growth tech, AI, and software megacaps.
>>> Group 2 - “Have Some”: Quality cyclicals, like certain Industrials, Financials, and stocks with unique growth drivers.
>>> Group 3 - “Have Nots”: Rate-sensitive sectors, including REITs, life sciences (linked to biotech), and consumer discretionary stocks, which may be pressured by ongoing inflation.
We are sector agnostic, but if I look at our current portfolio, we’re probably more exposed to Group 2—with a bit of sprinkling around Group 1 and Group 3. As clarity emerges, we are definitely seeking high-quality stock-picking opportunities in Group 3, where valuations are quite compelling.
Do you expect more FII outflows from emerging markets, including India, following Trump's win?
Emerging Markets (EM) face structural challenges with limited inflows globally, aside from periodic cycles. India remains the most promising EM for long-term investment. Opportunities in other EMs are largely stock-specific, not broad-based. FIIs may find occasional buying points in EMs, but valuation alone won’t drive sustained inflows. Trump’s win adds more pressure, likely pushing EM outflow further. Excluding India, the rest of the EMs struggle with the consistent earnings growth needed for steady capital flows.
Do you think India could benefit from trade tensions with China, as Trump is likely to impose significant import duties on many Chinese products?
Yes, India stands to benefit as the "China+1" strategy gains momentum, with EMS (Electronics Manufacturing Services) as a direct beneficiary. A stronger dollar should also support India’s export sector in the near term. Long-term impacts will depend on factors like immigration policy changes and the pace of onshoring, making it an evolving opportunity worth watching closely.
Do you expect the US Federal Reserve to continue cutting interest rates in the December policy meeting, and then will it take a pause before further reductions?
We already saw a cut in November. The likelihood of another in December is around 50/50.
Do you think the equity markets have fully priced in the ongoing Middle East tensions? Also, is the worst behind for Indian equities?
Equities have shown little impact from Middle East tensions, which has been strange but typical of recent conflicts. Oil prices have also remained stable around $70 a barrel – that resilience was a bigger surprise – may be driven by weak economic growth globally. For Indian markets, this correction is healthy after prolonged gains, though weak earnings persist.
Do you see earnings risks continuing in the December quarter, following weak numbers in the September quarter?
Yes, earnings risks likely persist into the December quarter. So far, we’ve seen no concrete indicators of improvement, aside from “hope”.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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