Global investor, noted author and leading market expert Ruchir Sharma sees the dollar weakening going forward and makes a case for emerging markets rising over the next 5 years. Though he finds India attractive, he sees more attractive opportunities at significantly cheaper valuations in other emerging markets. Sharma, The Chairman of Rockefeller International and Founder and Chief Investment Officer of Breakout Capital was speaking at the Express Adda in Mumbai on Wednesday to Anant Goenka, Executive Director, The Indian Express Group and K V Kamath, Chairman, National Bank for Financing Infrastructure and Development (NaBFID) and Chairman, Jio Financial Services.
Sharing his views on capitalism and factors that would be impacting global economies going forward, Sharma expects that “for the next 5 years, the rest are going to rise again Vs US. These countries now are in a much better postion. The rest includes emerging markets like Mexico, Brazil, Korea, Taiwan and many others. In fact every market that’s not a developed market. In fact there are 160 countries in the world that have been identified as emerging countries. In past decade, they have been able to address some key issues like balance sheet and offer more promise Vs US. The world should take note, the rest are rising again.”
What’s the worry in US now?
Sharma highlights his concerns with capitalism in his latest book, “What Went Wrong with Capitalism.” Elaborating more on the thought driving the core of the book, Sharma highlighted how, “US has been using a lot more debt to grow in the last few years. In fact the amount of Govt debt that US has taken to achieve the growth rates that they have done in last few years is exceptional. In the middle of an economic expansion today, they are running a deficit of 6% to GDP. Their debt to GDP is the third highest in the developed world and on track to go even higher than Italy with only Japan being higher than them.”
He expects weakness in the dollar going forward. One of the concerns he highlights is how the share of dollar is coming down in the reserves held by central banks globally. According to him, they are increasing holdings in gold and smaller currencies like the Swiss Franc. “The sanctions against Russia is the single biggest mistake for US. This, kind of led to acceleration in Central Banks buying gold and currencies like Swiss Franc. It started around in 2022 closer to the time when US imposed sanctions on Russia. Emerging Markets are likely to benefit from a weaker US dollar, expect more capital flows on weaker dollar. Going forward, I see rupee closer to 80/$ rather than slipping near 90/$. The Euro too is likely to strengthen in 2 years and may go up to 120-130 level.”
What’s the call on India?
Sharma points out how a weaker dollar will help emerging markets but given that he sees the rupee strengthening over the next couple of years, what’s the call on India? He considers that traditional metrics don’t work for India and valuations have been always on the higher side but what matters is that, “India is on the right economic trajectory. I still like India but some of the other countries are staging a comeback and offer much attractive valuation. That’s a more exciting opportunity at the moment but India will remain the cornerstone of EM investment.”