Use Business Acumen, Not Patriotism For Investment Decisions, Says Vikas Khemani

While the markets on Tuesday saw some recovery and extended gains for the second day after a series of decline, Vikas Khemani, founder of Carnelian Asset Management & Advisors Pvt., spoke about the need for business acumen to make investments in markets. He expects markets to see some recovery in the coming quarters.

"I am nationalist, but money will not be made by that, my business will not survive on that. So I have to do justice to what I do," Khemani told NDTV Profit's Niraj Shah.

Market corrections are cyclical in nature and occur every two to three years, he pointed out. That recovery typically follows a period of decline. "It is not a switch, it's a dial," he added, indicating that market changes are gradual and not immediate.

The comments came amid a correction in Indian equity benchmarks, with the Sensex and Nifty currently trading over 12% below their record highs reached in September 2024. The downturn is primarily attributed to uncertainties surrounding the escalating tariff wars, which intensified after Donald Trump began his second term as the US president. Additionally, prolonged selling by foreign investors and disappointing quarterly earnings have contributed to the market's decline.

Yet, the 50-stock index remains expensive. The benchmark has a price-to-earnings multiple of more than 21, the highest among its Asian peers and the second highest among global, Bloomberg data showed.

Last year, rising interest rates and tightening liquidity had a significant impact on markets. But now, things are starting to change, Khemani explained. Liquidity, which was restricted by the RBI to defend the rupee, is being pumped back into the system, he said.

Additionally, the government's increased spending and tax relief measures are expected to stimulate growth. "With a two-quarters lag, the impact of these changes will start becoming evident," he noted.

As economic numbers improve and markets show growth, investor confidence will rise. Growth story will gain traction in the next quarter or two, driven by policy pivots and liquidity shifts, Khemani said.

As US' imposition of reciprocal tariffs creates uncertainties globally, Khemani sees India being in a relatively favourable position.

Given the country's strategic importance to the US, a deal will eventually be struck that will benefit both countries, according to him. While the situation may cause some sectoral shifts in the short term, Khemani doesn't foresee a major negative impact on India overall.

Corporates have also held a positive approach when it comes to the tariffs and expect the impact to be manageable, he said.