Earnings downgrades widespread, more expected

Tepid earnings growth in the September 2024–25 quarter, amid sticky inflation, withdrawals by foreign investors, and global headwinds, has diminished the appeal of Indian markets. ANDREW HOLLAND, chief executive officer at Avendus Capital Public Markets Alternate Strategies, tells Puneet Wadhwa in a telephonic conversation that flows—especially passive—will favor the US and developed markets over emerging markets (EMs). Edited excerpts:

- ANDREW HOLLAND

It has been a slow grind for the markets, continuing their downward spiral. Do you expect this tepid mood to carry into 2025 as well?

With foreign portfolio investors (FPIs) typically winding down in December, we may see domestic investors taking the lead and helping markets bounce from recent lows. That said, with the volatility expected around President-elect Donald Trump's administration taking office on January 20, 2025, the bounce may be short-lived.

markets, coupled with earnings under severe pressure, lead us to believe that foreign outflows may not abate quickly.

Is it better to stay in cash for the next few months?

The risk lies in further China stimulus, which could overshadow India and impact foreign investment flows. It's a tricky few months ahead, and as such, we maintain a cautious view of the markets. Cash as a strategy is, therefore, an option until Trump takes office and clarity on policies starts to emerge.

Does that mean more foreign outflows ahead?