Despite continued concerns regarding geopolitical tensionsweak consumer trends and global uncertainty, Prashant KhemkaFounder, White Oak Group believe it Indian stock market has already absorbed much of the pessimism. Speaking to ET Now, Khemka argued that uncertainty is a permanent feature of invest and that markets often reward investors when sentiment is at its lowest.
Uncertainty is a constant, not an exception
Khemka rejected the idea that the current environment is unusually uncertain, saying every market cycle has its own set of fears.
“I’ve been investing in Indian markets, or markets in general, for much longer. I can’t remember a time when there was no uncertainty or worry. The closest the market came to no worry was during the peaks of the 2007 bubble, the 2000 bubble or the 1992 bubble. It’s only closer to the peak that you see less worry.”
He noted that concerns evolve over time, but markets eventually evolve.
“We have forgotten most of these issues. People were worried about Grexit, then Brexit, and later tariffs. COVID was obviously very serious. Right now, the worries and uncertainties that we are talking about won’t even be remembered in a few months. Certainly, by next year, they will disappear.”
According to Khemka, the correction from the September 2024 peak, combined with the cost of stocks and the time value of money, effectively reflects a much steeper adjustment than the overall index levels suggest.
“The market is down from its September 2024 peak by a mid-to-high single-digit percentage. Add another 5-7% for the time value of money and cost of equity, and that equates to a decline of over 25%. I think that’s already creating a lot of negativity and pessimism. I feel great about making money from here on out.”
No bubble in India, says Khemka
Responding to concerns over high valuations, Khemka said India was not experiencing a stock market bubble.
“I would say there is no bubble in India. It is debatable whether AI is a bubble globally or not. Only with hindsight one knows if it was a bubble. But in India there is no bubble because there is not much related to AI.”
He explained that creating new highs is simply part of the long-term behavior of the market.
“It is the nature of the market to create new highs at any time. Over the course of anyone’s investment journey, there would be thousands of new highs. One new high does not necessarily mean the market is overvalued.”
The sideways phase could eventually give way to an uptrend
Khemka believes that Indian stocks have been moving largely sideways for almost two years, rather than being in a sustained bear market.
“Sometimes markets go up, sometimes they go down, and sometimes they move sideways. We’ve been in a sideways market for about 21 months. Yes, I would like to see the market eventually trend upward. It doesn’t necessarily follow a straight line. There will be ups and downs, but a gradual upward trend would obviously be the desirable outcome.”
Foreign investors remain deeply pessimistic
Khemka emphasized that foreign institutional investors remain far more negative on India than domestic investors, describing current sentiment as one of the weakest it has ever seen.
“Among foreign investors, pessimism about India, on a relative basis, is higher than ever before in my 20 years of professionally managing Indian money.”
He clarified that the pessimism is relative to other global stock markets rather than reflecting a general environment of risk aversion.
“Emerging market fund managers are significantly underweight India. India is one of the most underweight countries in emerging market portfolios, reflecting this pessimism.”
Domestic investors less optimistic, but not bearish
Although domestic investor confidence has weakened from last year’s highs, Khemka believes it has not reached extreme levels.
“Today, domestic investor sentiment is weaker than it was 12 months ago. I wouldn’t call it peak pessimism, but it is significantly lower. If pessimism is on one side and optimism on the other, I would say current sentiment is below average and leans more toward pessimism than optimism, but it is far from the peak pessimism that investors are currently experiencing world.”
Long-term opportunity in a weak climate
Khemka’s assessment suggests that weak investor sentiment, particularly among foreign investors, could itself pose an opportunity. While recognizing that uncertainties remain, he believes that the markets have already taken into account much of the bad news. Periods marked by widespread caution often set the stage for stronger long-term returns rather than signaling the end of the investment cycle, he says.