'Not too worried about markets as flows unlikely to taper off soon'

The real concern is on the external front. We are witnessing rising trade barriers, like recent tariffs Ramesh Mantri CIO, WhiteOak Capital Asset Management Co.

- Dipti Sharma

India faces external risks even as the domestic economy stays on a solid footing, according to Ramesh Mantri of WhiteOak Capital Asset Management Co. Improving domestic growth, rising liquidity, and potential rate cuts are expected to aid recovery, but the "real concern is on the external front" from growing global protectionism to US-China tensions, said Mantri, chief investment officer (CIO) at the company.

Mantri isn't worried about domestic markets. Even though small-cap valuations are a concern, he expects stable domestic flows—from mutual funds, insurance (including unit-linked plans), and Employee Provident Fund Organisation—to support Indian equities as these are unlikely to taper off anytime soon, he said.

Edited excerpts:

What do you see as the biggest risks for the market right now?

The domestic economy is in good shape—growth is improving, liquidity has picked up, and rate cuts should support recovery, though with a lag. The real concern is on the external front. We are witnessing rising trade barriers, like recent tariffs even on Japan—a key US ally—which shows how broad-based protectionism is becoming. Then there is the uncertainty around US-China relations; even if a deal is signed, we don't know how long it will last. Geopolitical risks are unpredictable and could disrupt exports.

Although these risks have been manageable so far, this may change. India has a chance to boost its manufacturing and R&D, but despite some progress and new government schemes, it still trails behind countries like China in electric vehicles (EVs) and industrial technology.

On the markets, the main concern is valuations in small caps. However, Indian markets are supported by strong, stable domestic flows—from mutual funds, insurance (Ulips), and EPFO—which aren't going away anytime soon. So overall, I am not too worried.

What is your take on current valuations—do they seem stretched?