Prashant Paroda, senior portfolio manager at Allspring Global Investments, believes the Indian equity market could offer stability amid global volatility, particularly as earnings from United States technology companies disappoint.
In an interview with CNBC-TV18, Paroda discussed the potential for foreign institutional flows to return to India, highlighting the impact of artificial intelligence stock valuations and the need for taxation parity with regional peers like China and Hong Kong.
This is an edited transcript of the interview.
Question
What is your view on the Indian market right now, especially in light of the upcoming election results and elevated crude prices?
Answer:
India actually might be a more stable market this quarter given the volatility you are seeing in artificial intelligence (AI) names. The hyperscalers in the United States have reported, and most of them are showing slowing in their core business. The market is questioning the capex that they will be doing next year.As these hyperscalers disappoint on earnings, you see Taiwan and Korea suffering along with it. India might actually be a more stable market in this quarter, especially given that most of the earnings coming in are in line with expectations. India might be more stable going forward.
Question
Following the recent sell-off in Wall Street technology stocks, are you seeing foreign institutional interest and conversations about allocating money to India?
Answer:
If you look at the markets that haven’t worked this year and that don’t have an AI kicker, it is basically India. So far, the last three years has been a one-way trade on AI.Going forward, it will be a stock-specific trade. It won’t be that everything lifts all the stocks, and people are going to be more cautious going into next year. I think India will definitely come back into the picture, especially since ’24, the multiples haven’t really expanded, and some of the stocks that have lagged might come back into the picture in the next year.
Question
How big a factor is taxation in attracting foreign flows, and would a review or relief on that front help bring money back to Indian markets?
Answer:
Yes, definitely. India should compare itself with China and Hong Kong and how they are taxed, and it should be at parity. If we get back to parity, that impediment sort of goes away from the foreign investor perspective.On the core, Indian financial markets are still showing healthy growth, which you do not see in China. The core businesses in China are still suffering in this slow growth, while in India, the economy, despite this high crude, seems to be chugging along. I believe once tax is at parity, people will start looking at India with new light as well.
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India offers stability amid US tech volatility, says Allspring Global’s Prashant Paroda
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India offers stability amid US tech volatility, says Allspring Global’s Prashant Paroda