Global Reset & India’s Investment Opportunities with Manish Chokhani

The world is always better tomorrow, but at a price. As an investor, we should be thoughtful about what price we are paying and what paybacks we are getting on the investments we are making or anticipating. I do think people should be a little bit more objective about the prices that one is paying for opportunities which are surely there, but when you pay a lot for that cheery consensus, it often means you're sacrificing a few years of returns. When a company goes from being bad to merely terrible or the other way around, it's a rate of change, and you make money on that. It helps you climb up the ladder.

We are still at a 6-6.5% GDP growth rate, but we clearly need to be at 8 to 10% to lift everybody up. I think it's being missed by our policymakers that the weakening of the rupee has not led to a rise in our export competitiveness. The only thing in the investor's control is the entry price you pay. After that, everything is up for grabs. I think we're in the middle of a raging bull market. I don't think anything which is under or undiscovered.

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Vivek Anand: Hello, everyone, and welcome to another episode of Bazar and Beyond, where we deep dive into the world of finance, investing, and more to help you make smart investment decisions. Your host, Vivek Anand, is one of the most respected voices in the markets. He has founded and led financial services businesses across investment banking, investment management, and private equity. He's currently a director at Inam Holdings. Thank you so much, Mr. Chokhani, for doing this with us.

What makes Manish optimistic about today’s markets
Vivek Anand: So, I want to start off with 2025 being such an eventful year. We saw Trump's liberation day tariff war with China, there's conflict with our neighbor, and then there's also job losses due to AI that is happening. What makes you an optimist today?

Manish Chokhani: Well, the purpose of investing is to be an optimist, so you have to invest on the basis that the world is always better than it used to be. But what you say is absolutely true — the world is in a way resetting the rules of the game, which was set post-World War II and which kind of got extended to an extreme post the global financial crisis when the West discovered the power of the printing press. As you know, maybe $6 trillion were printed by the US Fed after the global financial crisis, and it has had no adverse consequence on the dollar vis-à-vis the rupee. So it should have gone down by 6 to 7%, but instead, we've had the rupee going from 40 to almost 85.

The rules of the game being reset have many repercussions because the world was everything was pegged to the West. Whether it's the UN Security Council, whether it's the US SWIFT, which runs the global financial architecture, or whether it's the store of value — it's in the process of getting reset. And I think what the Trump administration has realized is that they cannot be running these kinds of fiscal deficits, this kind of debt profile, and this kind of balance of payments forever. In a way, counterbalancing the production of the world and only being a consumer economy — what he's doing is the right thing, and it had to be done.

What happened post-1990, with the breaking of the Berlin Wall, was a one-way tide in favor of globalization and financial assets. I think that era is coming to an end, and we just probably haven't realized it yet. When we look back in history, we will probably look at 2025 as the year where the rules got reset.

Now, you're seeing this China-Russia-Saudi Arabia-type block emerging as the counterweight to the US. They've created their own SIPs as a counterbalance to the SWIFT network to do money transfers. We're already seeing flows moving away from the dollar, but the dollar is still remaining the store of value. It's a game that will play out over the next five to 10 years.

With the way we are fragmenting this era of globalization, we will have higher tariffs, which means we’ll have higher inflation. There will be little bit broken supply chains, it won’t be a one-world supply chain because people are now looking for security of supply rather than just-in-time supply. You're looking for resilience of your supply, especially post-COVID and with all these geopolitical wars taking place. Everyone has woken up to the fact that it's worth paying a little bit more for that assurance when crises hit.

Vivek Anand: So, you’re suggesting that higher tariffs will create resilience?

Manish Chokhani: Exactly. Europe was so dependent on Russian oil and gas, and then, when the Russia-Ukraine war hit, Germany got all the energy sucked out, and it made the German economy uncompetitive. All these thoughts are now in the heads of policymakers. I don’t think investors have as yet discounted this because we are still faced with this cheap money driving a wall of money toward risk assets. But we all grew up thinking the world is always better tomorrow, like I also started my answer with that. But the world is always better tomorrow, but at a price.As an investor, we should be thoughtful about what price we’re paying, what paybacks we’re getting, and whether the risk is worth it.

Awareness of market trend shifts among the current generation
Vivek Anand: Do you think Indian investors, specifically a lot of retail investors who have come into the market, are aligned to the fact that this shift is happening in your understanding and your experience?

Manish Chokhani: It's not just India, I think globally. For 30 years or more since 1990, markets have basically gone in one direction. You've had the occasional hype in TMT, which melted in 2001, or the hype in BRICs that melted in 2008, but by and large, people have seen that whenever there's trouble, the central banks come to your rescue. They print money because no politician in the world wants the voting public to feel that they're suffering and that their standard of living has gone down.

This premise that "someone's got my back" has made equity investors in a way risk-averse. So even when you have a war, you think of buying the dips rather than thinking about stashing something away for a rainy day. You don't necessarily think about having insurance for another home, for example.

It's a younger world now, especially in India. And maybe it's a reflection of my age as well. As you get older, you think more about risk than about opportunity. But on balance, I do think people should be a little bit more objective.

Vivek Anand: Would you say that Indian investors should be more cautious, or is there something they’re missing here in the current environment?

Manish Chokhani: I wouldn’t say necessarily cautious or fearful, but objective. When you pay a lot for that cheery consensus, it often means you’re sacrificing a few years of returns.

Investor perspective on India’s decision to opt out of the RCEP agreement
Vivek Anand: India is also in discussions like we recently signed a free trade agreement with the UK, we had a similar agreement with Australia a few years ago, and we're also in discussions with the US. How should investors look at this realignment, especially considering India also exited the RCEP a few years back?

Manish Chokhani:
It’s not a simplistic thing to say, but number one, remember when the WTO was set up, it was an organization really set up to help those who framed the rules — which was the West. It was about trade, not services.

When they wanted China to come in, the US said, “Let somebody else manufacture,” and that is the commoditized end of the world. I don’t think in the wildest dreams the West realized that 20 years later, China would become 50% of the world’s manufacturing. India, at that time, wasn’t really part of the Western block. We were excluded from WTO and the terms of trade were very much stacked against us.

India staying out of RCEP was a good thing because we would have been flooded with cheap imports from China via Vietnam, Thailand, or Malaysia. We lacked trade agreements with the consuming markets of the West. But now, we are signing agreements with the UK, the US, and others.

Vivek Anand: So you're optimistic about the direction India is going with these agreements?

Manish Chokhani: Yes, on balance, I think we will end up as a big gainer. India needs to play its cards wisely, but the strategy is shaping up well.

Manish’s personal market failures and the lessons learned
Vivek Anand: Any industry stock or thesis that you had that failed in the past? What did you learn from it and how did that change your investing style?

Manish Chokhani: There have been several instances. India consistently disappoints both optimists and pessimists. For example, when my son came back from university, he asked, “Dad, you always bet on the Indian consumer, but have they ever surprised you on the upside?”The honest answer is, the stocks have surprised, but the businesses haven’t. India remains a three-tier economy: 25 million Indians are at the world standard, 200-250 million are at a Filipino level, and a billion are still in African-level conditions.

The lesson is that the only thing in the investor's control is the entry price. After that, everything is up for grabs.

How to forecast and decide on holding stocks for the long term
Vivek Anand:
How do you forecast and decide on holding stocks for the long term, considering the uncertainty?

Manish Chokhani: When I was young, my mentor taught me to ask: “Can this company earn its market cap?” As a buyer of stocks, you’re buying the whole company, and you need to think long-term. If you can’t imagine a company earning its market cap, then you should reconsider the investment.

Underappreciated sectors with strong future growth potential
Vivek Anand: What sectors do you think are underappreciated and may break out in the next 3 years?

Manish Chokhani: I think the financials sector hasn’t gone to absurd levels yet. While sectors like manufacturing, defense, auto, electronics, and energy are all exciting, they’re already priced in. But financials, particularly banks, NBFCs, asset managers, and insurance, still offer a lot of potential for long-term wealth creation.

Manish’s favorite book recommendation for investors
Vivek Anand: Any book recommendation for our viewers?

Manish Chokhani: The foundational book for all of us is The Intelligent Investor by Benjamin Graham. He talks about margin of safety and circle of competence. Anything you read from him will shape your investing philosophy.

Summary and closing thoughts
Vivek Anand: Thank you so much, Mr. Chokhani, for taking the time out.

Stay safe and invest wisely.
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