Emerging Markets Currencies Could Further Depreciate If US Tariffs Continue: Enam Holdings' Sridhar Sivaram

The global economic environment remains volatile, with policies in the US playing a significant role in shaping the outlook for emerging markets, including India. Sridhar Sivaram, investment director at Enam Holdings, notes that the US' tariff policies have already begun to affect emerging market currencies, which could see further depreciation if these policies continue.

He is particularly concerned about the impact on the Indian rupee, as the Reserve Bank of India has been forced to defend the currency. While the RBI’s actions have been important in the short term, Sivaram said that this defence cannot be sustained in long run.

"The RBI might have to raise interest rates to stem the rupee's depreciation," Sivaram told NDTV Profit. He is surprised by the recent interest rate cuts by the central bank, especially given the uncertainty in global currency markets.

"Markets are not in the best mood right now," he observed, acknowledging the uncertainty that has led to stock price declines. While Sivaram is not bearish on mid and small caps as a whole, he advises a more selective approach. There are opportunities within these segments, but the market is going through cyclical issues that could affect performance in the short term, he said.

Domestic SIP flows are crucial in stabilising the Indian market, reducing volatility amid FIIs' outflows from emerging markets, Sivaram said. However, he warns that these flows could taper off, potentially posing challenges for the market.

He remains optimistic about India’s long-term prospects, but advises investors to buy stocks selectively.

Regarding the banking sector, Sivaram prefers large-cap stocks, particularly public sector banks, which have delivered strong returns. While he acknowledges opportunities in mid and small-cap stocks, he suggests a more selective approach, as the market is going through cyclical issues.