Why Aswath Damodaran Likens India to Palantir, China To Amazon | Profit Exclusive

That Aswath Damodaran, known globally as the "dean of valuation", is cautious about valuation of Indian equities is well known. In an exclusive interview with NDTV Profit, Damodaran elaborated on his India view, offered a more nuanced take on his view, likening the country's prospects with that of Palantir, one of Wall Street's most promising growth stocks.

"Palantir is still early in the game but has a growth story to tell," Damodaran said. Palantir is a data analytics firm that listed at $10 five years ago and is up 15X since.

Damodaran, professor of finance at NYU Stern School of Business, had a word for advice for Prime Minister Narendra Modi: "do not downplay the weaker links in the Indian economy".

"Modi is the lead seller of the India story," Damodaran said. "Because he is such a good salesperson, he sometimes downplays the weaker links in the India story or does not talk about it. But I think it will be a more credible story when he tells what we need to change."

Damodaran, who has written several books on equity valuation, as well as on corporate finance and investments, said that even as he believed Indian equities were overvalued, "it would continue to remain hot for sometime".

Portfolio managers fear that "if you are not in the Indian market, you will be left behind," he said. "Like AI. You need to have Nvidia if you are a portfolio manager. They played the China game and now they look at India."

Further, as India gets wealthier, there will be fewer places to park that wealth, as investing abroad has many regulatory guardrails. "Indian equities will therefore remain hot for some time."

Damodaran drew a different analogy for China under President Xi Jinping, calling it a "predictable stock" like Amazon, "...except if you do things that get in his way. He is pretty ruthless about the endgame. But he will be more predictable with Trump."

He cited the example of what happened to Chinese tech companies like Alibaba and Tencent after 2019, when Beijing used its might to rein in their growing influence in the economy. "I will be worried about whether I will be at where Tencent was after 2019."

Besides Amazon, China is also a little bit like the character 'Thanos' from the Marvel Cinematic Universe, Damodaran said. "It will get you. The Chinese have a mission and nothing is gonna stop them from getting there."

On Russia, he said the country has declined in power except for the military. But Vladimir Putin has survived and consolidated power.

"Putin is a survivor. To stay on top, you have to cut down your rivals. But in many ways, he is easier to read. He doesn't hide behind things that make you polite, unlike the Chinese."

Watch Aswath Damodaran's full interview here: