'If India-US Trade Deal Kicks In, Diversify Away From India': Saurabh Mukherjea's BIG Warning For Investors
India-US Trade Deal: Saurabh Mukherjea of Marcellus Investment Managers recommends investors to diversify their portfolio into US and European markets
India Inc anxiously awaits the announcement of the India-US trade deal after months of negotiations between two of the world's top economies. The question on every investor's mind is how should the market participants play this? Considering the present scenario, market veteran, Saurabh Mukherjea, Chief Investment Officer (CIO) and founder of Marcellus Investment Managers, has warned that investors must diversity away from Indian markets.
Speaking about the trade deal, also known as the India-US free trade agreement (FTA), in an exclusive interview with NDTV Profit, the market expert expressed confidence that the FTA will materialise and that the market has baked in the trade deal factor.
"The Indian market has baked in the factor that there will be an FTA. However, if there is no FTA, we expect to see a pullback in the market," Mukherjea told NDTV Profit. Mukherjea claimed that the Indian market has done "extremely well" over the last five years and has been the one of the best performing markets.
Why is Mukherjea suggesting traders to diversify 'away'?
Despite being bullish on several Nifty 50 stocks, the founder of Marcellus Investment warned that the the Indian market is "expensive" and the Indian economy is slowing down. Explaining why investors should diversify away from India, Mukherjea states that due to rich valuations, earnings slowdown, the risks are elevated in the domestic space.
"Chances of rupee depreciation over the next few is extremely high and the devaluing factor is going up by the passing day," warns the expert. In the backdrop of the upcoming trade deal, he added that the co-relation between the Indian and American market is the lowest.
What are Mukherjea's preferred bets amid the trade deal?
Elaborating on his current bets, Mukherjea clarified that during portfolio diversification after the trade deal kicks in, investors should choose American and European midcaps and should avoid large caps. He added that the global large-cap stocks such as Nvidia are still very expensive, which may not be attractive for retail investors.
"Small caps in US are trading at their deepest discounts possible to large caps in the quarter of a century. So, the contrast is enormous as Indian small caps are trading at their richest valuations in a century," Mukherjea told NDTV Profit, explaining his stance on American small caps amid the trade deal.
However, he added that US small caps—growing earnings twice as fast, but are trading at their biggest discounts to large caps. "So, this is a straightforward trade. Switch out of Indian small caps and switch into US small caps," he concluded.
