India's recent market underperformance may have gone too far, according to Mark Matthews, who believes the correction has created a compelling case for a re-rating as macro fears begin to ease. Speaking to NDTV Profit amid ongoing geopolitical tensions in the Middle East, the Head of Research-Asia at Julius Baer argued that markets are already looking past the conflict, with earnings momentum continuing to drive global equities higher. “If the S&P 500 can hit new highs in the middle of a war, it tells you the market is focused on earnings, not geopolitics,” he said, pointing to robust US earnings growth trends.
Matthews highlighted that India's sharp correction since late February appears disproportionate, especially given that the country is not directly involved in the conflict. In fact, he noted that India has been among the worst-performing markets globally in this period — an outcome he finds difficult to justify fundamentally.
Valuation indicators also suggest oversold conditions, according to him. He points out that the Nifty's price-to-book ratio recently fell to just 0.6 times that of the S&P 500 — levels seen only twice in the past two decades. On both occasions, Indian equities delivered strong returns over the following 12 months.
ALSO READ: 'Buy The Unpopular': Raamdeo Agrawal's Five Mantras Includes An Ignored Sector To Watch
Adding to this, foreign investor positioning has sharply unwound. Holdings in the iShares India ETF have dropped roughly 30% since late February, signalling a significant liquidation event that has exacerbated the correction.
A key driver of the selloff has been India's sensitivity to oil prices, given its reliance on energy imports from the Middle East. Concerns around supply disruptions, ranging from shipping bottlenecks to LPG shortages, have fed into bearish sentiment. However, Matthews believes these fears may be overstated. He expects oil prices to trend lower over time, especially if the conflict moves toward a ceasefire or even a prolonged stalemate.
“Historically, wars don't tend to cause recessions or sustained market declines,” he noted, adding that infrastructure damage in the region appears limited and recoverable.
Valuations Reset, Re-Rating Ahead
Beyond geopolitics, Matthews pointed to valuations as the earlier trigger for the correction. India had been seen as expensive at its 2024 peak, but with price-to-earnings multiples now back in the teens, that concern has largely eased. He also flagged a structural shift in global investor flows. As foreign investors rotated back into China, India, previously a crowded emerging market trade, bore the brunt of selling. With that repositioning largely behind, the path is clearer for fresh inflows.
Matthews believes India could now emerge as one of the most attractive markets if geopolitical tensions cool. “It went down even more than markets closer to the conflict—that doesn't make sense,” he said.
ALSO READ: To Invest Or Not To Invest: Raamdeo Agrawal Weighs In On IT Sector Amidst AI Disruption
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.