Global risks loom, but India stands tall amidst Asia's volatile recovery: Geoff Dennis

"India, of course, we hope they get a trade deal with the US, whatever that means, but India is less vulnerable to pressure on the tariff front than are some of these other markets. And I agree with Rajat in terms of the domestic drivers to the economy looks pretty good," says Geoff Dennis, Independent EM Commentator.

Would you agree with Rajat on the fact that Indian markets have shown resilience. He says that we will move even further from this point of 25,000 that the markets are currently at. What is the current investor sentiment with respect to the Indian markets?
Geoff Dennis: I agree with almost everything actually Rajat said. In fact, the biggest danger for the Indian market may well not be anything that is going on in India, but whether we get a global pullback again; because frankly, the rally in global markets since we started to get what President Trump likes to call as trade deals which are not really trade deals, they are actually just the framework of trade deals, this rally may have gone a little far in the short term but in terms of relative performance India looks very-very robust indeed.

It is worth pointing out that although India has done well in both local and dollar terms so far in May, the three other big markets in Asia -- Korea, Taiwan, and China have rebounded much more, perhaps they got more oversold, who knows?

But and all of them I think have challenges. China with a weak economy and the property sector being still very-very weak indeed. Korea is going to be a big focus of the US in terms of tariff pressure going forward because as they have been already to a certain extent and Taiwan, of course, is entirely driven, almost entirely driven anyway by technology and tariffs it is fair to say.

India, of course, we hope they get a trade deal with the US, whatever that means, but India is less vulnerable to pressure on the tariff front than are some of these other markets. And I agree with Rajat in terms of the domestic drivers to the economy looks pretty good.

There will be an interest rate cut given that very low inflation read the other day. And so, this is all sustainable with, as I say, the biggest risk being do we get a global pullback at some point because global markets especially the US are getting a little bit carried away here in the short-term because there are still very high tariffs in the US on a lot of overseas countries, about nearly every overseas country and, of course, the US economy in my opinion is slowing down and we still have a recession risk.

So, for me the global risk to India is still there. The outperformance of the Indian market versus the rest of em looks to me very sustainable.

When you when you speak about the China opportunity, you also gave a comparison of the Korean markets, the Taiwanese market to India, but let us speak about particularly the China opportunity with respect to how do you see it to India in light of the fact that now a deal between China and the United States has been arrived at and, of course, globally the concerns around whether or not that deal will be extended beyond 90 days, those concerns have eased off because both China and the United States perhaps have realised that they both need to work with each other and that is essentially what the commentary also has been from the US side and the Chinese side as well.
Geoff Dennis: Yes, correct. It is worth. There are two issues here. Number one, the tariffs are still high and even with this “deal” the tariffs between China and the United States or the comparative tariffs remain very high and are going to be very disruptive to trade.

They are going to cause some inflation in the US. Maybe you are not going to get complete breakdown of trade that was implied, of course, by the tariffs which were in double digits.

So, we also do not know, as you have rightly said there, what will happen when this 90-day period is up. So, I do not think you can tuck this away and say it is all sorted, everything is fine because the tariff levels are still very high and are constrictive for growth and will not in my opinion solve the US trade deficit anyway, which is a whole separate issue.

But the second point I want to make is that forgetting the international scene, the Chinese economy remains very weak. The Chinese government continues to promise dramatic measures to boost consumer spending. But at the end of the day, consumer spending is very weak.

The economy is being held down, as I said earlier, by the adjustment of the property sector. And if China has to rely less on exports, especially exports to the US and possibly who knows exports to countries like Vietnam and Bangladesh and Sri Lanka for re-export then onto the US because the US government is on to this thing of China basically trying to avoid tariffs by routing through third countries.

If exports going to remain on the weak side, the big challenge in China is a very-very soft economy and the GDP numbers for China are probably too high for this year. And all of that brings me back to the idea that India is going to be a better place to be as far as equities are concerned in 2025.

Since we are talking about the US market, what is your view on the dollar and do you feel it getting strengthened further in the coming few months?
Geoff Dennis: The dollar goes down from here and obviously it fell very sharply after so-called Liberation Day and it has stabilised and rallied a little bit since then.

And, of course, the Indian rupee which you have got up on the screen now has rebounded very nicely by about 2.5-3% since its lows. The weaker dollar has always been for me one of the best triggers if not the best trigger for emerging market outperformance.

And what is going on here is the effect of all of these tariffs and all of this uncertainty on the US economy is going to produce very-very weak growth for a period of time unless all the tariffs go away which I just think is not going to happen.

Even though as Rajat says they may settle down for a period of time, but they are not going to all go away. So, I am very concerned about the US economy in the next, let us say, three to four quarters.

I am also very concerned about this huge tax deal, beautiful tax deal, whatever they call it, the Congress is working on which is going to blow the budget deficit out further and push the debt level up further as well and all of this is negative dollar.

And although we have stabilised here in recently, the dollar is going to weaken and that is going to push money across to emerging markets generally that has been the historical record and India will be a beneficiary of this and arguably given where tariffs are settling with US and China, it is going to be a bigger beneficiary logically than a country like China or indeed a lot of other countries in emerging and this is one of the reasons why that Bank of America survey that The Economic Times highlighted this morning has India as the biggest overweight amongst investors at the moment. So, I see the dollar falling, will eventually get to 120 against the euro. The European markets do well. Emerging markets do well. India is a big beneficiary of that. And as Rajat also said it is a closed economy, relatively closed economy, not as vulnerable to softer exports as a number of other big markets in Asia are.

So, the dollar has been unpredictable this year for sure. Very unpredictable. It was supposed to go up with tariffs and it did not do so and that is because what people were doing was selling the United States. And I am not sure that is necessarily over yet depending on obviously how the economy plays out and depending on whether we get another massive jump in the fiscal deficit which is already high on the back, of course, of this tax bill that is getting pretty close in Congress itself.