So, much is happening in the world and pretty much for the last two-three years something or the other keeps happening. Do you keep the noise out because this time the repercussions for crude oil markets have been quite steep. I mean, a 12% uptick coming in in just the last week alone. Do you cut the noise, or do you get into wait and watch mode?
Samir Arora: So, wait and watch would mean cutting the noise because you do not know what is next. But in general, because of recent experience of two or three wars that we have seen in recent years, the market seems to be not bothered. So, the natural reaction again, and this time we are also doing the same, is to say let us just wait because A) in terms of time duration, it does not look like it is going to be a long war. Even Israel says we are going to do it for two weeks.
Iran has only a few X number of missiles. So, if you use 200 per day, you will finish them in 10 days. And so far, Iran is at least not trying to get us into the picture, which means they are not doing anything on the Hormuz Strait to stop flow of oil around that or to attack US troops in different Middle East countries. So, if it is in that sense, if it is a 5-10-day affair, even if oil is up 10%, then in a few days it will be down 10% or 8% or whatever and therefore, no point bothering. So cut the noise means wait and watch.So, what is new in the markets because there is a lot of sector churning that is at play. There was a bit of a respite back when we had that RBI policy, a bit of a jump up, but how are you looking at the markets right now because with this global uncertainty indeed the Indian markets are also selling off.
Samir Arora: So, I have become very bullish, not just bullish, very bullish and the main reason for that is that it is very-very clear in black and white that the world’s allocation to US stocks is coming down. The US equity markets absorbed 65-70% of the world equity flows. If we just go simply by MSCI World index in which US weightage became the highest ever and in say 2008-10 time period, it was in the 50s. Now, it is about 67-68%. And it is clear from hearing, reading, and even our own fund that we do not feel like putting back 70% in US.
So, for our own global fund we had 74-75% in US till say Jan end and now, of course, it is very less but our goal is to have 50% in US. And I can read and see many-many articles, you can also see flows into ex-US ETFs that those funds have started picking up and getting 2-2 billion a week or something which they used to get zero money before or very little.
I am currently reading Ray Dalio’s book saying that the US is going to have a heart attack in three years in terms of their dollar and US debt and all that. So, all these things are leading to the fact and also because of political issues and other issues that the world does not want to get back to a 67% weight and slowly if that happen and it is already happening, then the 33%, 35% of the audience which is the 100 minus 65, if they get 5% from the 65-68 which US has, that is big flow for everybody. In our case anyway, we are also getting some flow. We mean market. And initially we do not need to get massive flows.
We first need to stop outflows which were happening for the last since October. So, if the FII stop selling and then buying a little and Indians are buying, the market can stop falling and you can look at it with optimism. I do not think market will go up a lot. But if you and everybody believes that the market will not fall a lot or may not fall or may go up 5-10%, then that is enough for the fund managers to seek midcap stocks and smallcap stocks. Once you are a little bit comfortable with the backdrop of the market and, of course, then the interest rate cut and the fact that our growth is better and all those other things will come, but it does not mean a big rally, but it can be viewed with optimism.
Also, share with us your view on China because you believe that China is an economy that cannot be ignored. We have got very strong retail sales numbers that have just come in this morning, highest ever since December of 2023. Their May manufacturing numbers even though contraction persists, there has been a slight improvement on that front as well. Given all of this, the tariff overhang is still there, although Donald Trump claims that they have come to some sort of truce on that front, what are you making of the Chinese economy?
Samir Arora: China is very good. As an investment, it is very good. We used to have 4-5% in China when we had 75% in US. Now our China goal is to have 15% and we are at some 12 odd percent. It is the tech stocks. The tech stocks there are very good. The auto stock is very good. They have similar to Spotify, Tencent Music. They have similar to our MakeMyTrip, the parent CTrip very good. All these are absolutely great companies and it is a cycle and China is very cheap. It has to be bought or should be bought and people are buying also.
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