Paroda has been adding to market laggards where earnings continue to compound but valuations have yet to reflect that growth. Financials and industrials are among the sectors he is adding to, with scope for a catch-up trade over the next 12–18 months.
This is an edited transcript of the interview.
Q: Two tracks to track this morning: one, Middle East war diplomacy, hopes of a resolution, and the second, the tech surge in the US. Nasdaq notching up a second straight record close, gaining half a percent, and the Nasdaq 100 also at a record, the first since June. What is your assessment? First, let’s start with the Middle East. Do you think this time is it, and post the midterm elections we could see a resolution? What is the market pricing in now?
A: The market seems to be climbing a wall of worry, and especially the US markets. Nasdaq is again coming back to its highs. It seems that they assume that some sort of deal will happen, whether it’s post the election or not is to be seen, but it’s good that they’re talking again.
I think they had like a three-hour discussion with Steve Witkoff (United States Special Envoy to the Middle East) and possibly more talks coming through. The key is that they already had a memorandum of understanding (MOU) a few months back, but they didn’t agree on the MOU. They have hopes of what the MOU looks like, and they just have to adapt to that MOU.
So, it’s good that they’re talking again, and I think it’s positive not only for the US, but for the rest of the world as well.
Q: There’s a lot of reportage about a ban on diesel exports. Do you think it’ll come to pass? And any thoughts on what it’ll mean?
A: You see that from time to time. Whenever there are shortages, surplus nations kind of try to ban exports, and the US might do that. But my sense is if there is positive progress on Iran, then you might not even need to do it.
So, there’s also more activity coming through. Xi Jinping (President of China) will be here as well, and China, being the biggest buyer of oil from Iran, might also have some views in terms of how to resolve this.
So, I think it’s great that the US is talking to Iran again, and then President Trump will meet President Xi. Hopefully, the world can come to some sort of resolution on the Strait of Hormuz.
Q: What about India? We underperformed, we have been underperforming yet again, though the flows picture improved a little bit temporarily, and now in fact we’re seeing some minor outflows. Your view on the Indian markets at current reckoning?
A: The Indian markets, I think there is definitely underperformance over the last couple of years, but even on a three-year return on a dollar basis, they’ve done okay.
I think it’s just a period, a phase for India where some of the large-cap stocks, the catalysts were missing. Now HDFC Bank, hopefully, will have a new announcement coming soon with a new head. And then you’ll also have some activity with Jio Platforms IPOing later in the year.
So, I think the picture for India looks positive, especially as you look into the next year as well, because after two years of subdued returns, it’s not like these companies are not growing earnings. Maybe the market was digesting the valuations and the artificial intelligence (AI) trade threw some people off, but I think for next year, if these big stocks continue to compound, there is a catch-up trade for India as well.
Q: Any new additions to your portfolio? Stocks that you’ve incrementally turned more positive or turned more cautious? And any thoughts on the NSE IPO?
A: On the NSE IPO, we think it’s a little expensive for our taste at this valuation. But it’s a great company, and if it ever comes to what we think a valuation is correct for the stock, we’ll definitely look at it.
From an India portfolio perspective, we’ve continued to add a little bit to the laggards this year, especially if we think earnings are continuing to compound and maybe the market is not rewarding it.
So, it’s just: look at the laggards this year, and look at the earnings compounding, and you will find a few names that I think will deliver on a next 12 to 18 months basis from our perspective.
Watch the full conversation here
Q: And you want to tell us the laggards which you’ve added in the last one or two months?
A: Obviously the financial sector is the biggest laggard. So, we’re looking at adding there as well. From our perspective, industrials also haven’t done as well, so we are adding some names on the industrial side as well.
Disclosure: Reliance Industries Ltd, which owns Jio, is the sole beneficiary of Independent Media Trust that controls Network18, the parent company of CNBCTV18.com.
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