Arora outlined four key reasons behind his constructive outlook on Indian markets: the first is India’s sharp relative underperformance this year, which he believes is unlikely to continue. “India has had its worst relative performance in 30 years, which is some 25-27% underperformance in 10 months,” he said. Such a wide gap versus peer and emerging market benchmarks tends to correct over time.
The second factor is a shift in global capital flows. Arora said international investors are starting to allocate more funds to non-US markets. “This year, non-US has beaten US by more than 10%,” he said, pointing out that while the S&P 500 is up about 13%, the rest of the world has gained 23–24%. He added that India has a “valid claim” to benefit from these flows, though it has been losing money partly due to tariff-related issues. With these tensions easing, he expects foreign investment to pick up again.
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Third, Arora highlighted domestic policy support as an important tailwind. “India has had a lot of interest rate cuts, goods and services tax (GST) cuts, tax cuts,” he stated, referring to the series of fiscal and monetary measures implemented in recent years. He believes the full benefits of these reforms are yet to be fully reflected in the economy or the markets, suggesting that their positive effects may emerge gradually.
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Lastly, he discussed the corporate earnings outlook and investor expectations. While acknowledging that the information technology sector may see limited growth, Arora stated that it is no longer deteriorating. He expects the broader market to deliver earnings growth of 12–15%, a solid performance in the current environment.
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At the same time, he urged investors to moderate their expectations. “The era of 20–25% annual returns was not normal,” he said. With government bond yields now around 6.5%, compared to 9.5% a decade ago, Arora argued that equity returns of 12–14% should be viewed as the new normal—and still attractive relative to fixed income options.
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With over half a million followers on X, Arora is popular for his witty and wise takes on the Indian market. He’d be interacting with the users of CNBC-TV18 ACCESS today (Oct 16) at 2 PM IST.
Watch the interview in the accompanying video
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