Veteran investor Samir Arora has urged caution despite CLSA’s recent move to up India’s portfolio allocation to 20% overweight while reducing its China exposure.
Arora, in an X post, reminded investors to keep expectations in check, noting, “Investors shouldn’t get ‘unnecessarily excited’.” His rationale? The real focus remains on U.S. markets, not on a rush away from China.
“CLSA report should not make you unnecessarily excited,” Arora posted, adding that Indian stocks have already seen significant losses while U.S. stocks are up, creating a 25% swing since September. He believes investors looking for India exposure have likely missed the major shifts in trade from India to the U.S.
On Friday, CLSA, a major global brokerage, made waves by reversing its October strategy that had favored China. The firm cited escalating trade tensions, concerns over China’s economic stimulus, and potential U.S.-China policy shifts under a Trump 2.0 administration as factors for scaling back its China bets. CLSA’s latest outlook paints India as more stable and resilient in the face of these uncertainties, despite net foreign investor outflows of $1.2 lakh crore in recent months.
CLSA argues that India has become less vulnerable to trade tensions and a stronger dollar. “India appears as among the least exposed of regional markets to Trump’s adverse trade policy,” it stated, pointing to India’s energy stability and domestic demand. While Indian stocks remain pricey, CLSA suggests that recent corrections make valuations more palatable, providing an opening for foreign investors who may have been underexposed to India.
Despite CLSA’s optimism, Arora’s caution underscores that India’s draw still hinges on domestic demand and international market volatility. With rising U.S. bond yields and concerns over China’s economic slowdown, Arora warns against reading too much into India’s portfolio shift, urging investors to stay grounded in light of the bigger U.S.-focused global trade picture.