He highlighted that hard assets, particularly gold, have outperformed equities in the short term and remain a key investment in the context of global monetary policies and currency debasement. He noted that India’s position in global trade is improving, but challenges remain in attracting FDI and boosting exports, especially with localization trends worldwide.
Chokhani believes that sectors like pharmaceuticals and IT services remain insulated in certain ways but need transformation to capture future growth, particularly with AI and biotech innovations. He said that India must develop IP, technology, and global brands to become a major wealth creator over the next 10–15 years, rather than relying solely on domestic consumption or services.
These are edited excerpts of the interview.
Q: Manish’s big call when we last spoke – and it’s been his call for longer than that – was that hard assets will do very well given the state of the world. I went back and checked: what has the Nifty done, what have gold prices done since the last time we spoke, which was on the April 15? From that point, MCX gold – in rupee terms – is up 17-18%. The Nifty in the same period, from April 15 till now, is up 6%. So you’ve got about a 3x kind of outperformance on gold compared to what the Nifty has done. Of course, this is a short time period. If you stretch this longer, the outcome does not change, and maybe even gets sharper. So he’s got that call right. His other big call was that India is uniquely placed in the new Trump world. Now the outcome for this has been mixed. We are uniquely placed, but on the other end of the spectrum.
A: What happened with the US and India was a surprise to everyone, including the protagonists here. Something changed during Operation Sindoor, and then I’m guessing something changed over the last week again to bring things back to even keel.
If you zoom out, India and the US have been the two best-performing markets in the world – the best democracies and the best places for capitalism to thrive. That narrative doesn’t change. As people say in geopolitics, you have spats with friends, and you only have a spat with someone you love.
This market has been driven by price-agnostic domestic flows, and you saw it shrug off this tariff shock.
Q: The market barely responded.
A: It is a small segment of the market which would have been affected because he exempted pharmaceuticals, because half of what the US consumes comes from India. They also exempted electronics, because all the iPhones would have become more expensive.
So, of the $80 billion, $40 billion was excluded from tariffs. The big numbers affected were textiles. But textiles are a very small portion of the market, and even those companies did not fall much because the market looked beyond the issue. On the horizon, the EU FTA should also help exporters.
The larger issue remains: India, as the third-largest economy, is still not a player in global trade. We don’t have things the world misses. Like Trump says, if you don’t have the cards, you don’t have the cards. We clearly need to step up our act to become more important globally.
But it has also created some difficulty with every country in the world now wanting to localise and bring back investments into their country, it puts a question mark on FDI. If you are looking for Americans to invest in India, Europeans to invest in India, excluding the EU, but including Switzerland and others. But it’s over 10 years, and if everyone is going to, for example, even in Europe, invest in infrastructure, invest in energy and invest in their defence, the US wants to bring semiconductors and everything back to the US, what are the 2–3% FDI flows that we were looking for? What happens to that?
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Number two, if this domestic flow keeps pushing asset prices up so much in India, the other smart money, which is private equity, tends to then not make investments in and rather, they’ve been taking investments out. And thirdly, you’re finding the strategics to whom typically we sold our companies are now – the AkzoNobel are selling to our Jindals, for example. And the Bhartis and the Singtels are selling down to our retail investors. The Koreans are coming and selling down to our retail investors. So that’s a bit of a muddle we are in.
And in that context, if you don’t have an export engine firing, you don’t have an FDI engine, you don’t have a CapEx engine, I think it was inevitable that what happened with this GST to kick-start this consumption cycle is a necessary and great thing that the government has done.
Q: Just to tie off that US–India point, what is your forecast? You think it’ll get done?
A: Yes. I mean, it doesn’t change anything. Even if you get to the 15 which the allies have, which is Japan, Korea, UK, I don’t think we get to 15, but if you’re 25 and you have some way around that… let’s see, maybe we end up at 20%.
Q: Likely is 20% or 25%
A: I would still hope for 20%. But clearly, it can’t be more than 25%. But having said that, what is this 20%? If it’s still only textiles, gems and jewellery – because the whole premise was that we’ll be able to become “friendshoring,” to bring US manufacturing to India. And if you take the India narrative of the last 10 years, what have we done compared to the 1990s when we took white-collared people and put them into making pharma generics and IT, the last decade has been the, how do I say, the formalisation of the blue-collar guys to become a Zomato or Amazon delivery boy or someone working for Indigo.
I am guessing that, as an economy, you need some drivers
Q: I want to ask you, just to complete that point, should we still expect stuff on pharma? There has been some fear-mongering around services. In a way, I said that’s our rare earth.
A: But if you switch off the GCCs from India, you’re going to hurt yourself.
Q: Logically, it doesn’t make sense. But we should not think about it.
A: I won’t worry about that.
Q: And pharma, which is the other sector?
A: Generics. We are so cheap that whatever they put, they’ll have to bear it. So it doesn’t make sense, which is why it was exempted. His problem is with US pharma and healthcare costs, which have gone completely crazy, and the profiteering. And it’s very odd. If you look at the top pharma stocks, just put Eli Lilly aside. But Bristol-Myers, Pfizer, and Merck are all sub-10 P/E multiples. Which are innovator companies? If you take even the Europeans, Novo Nordisk and Roche, are at 13-14 multiples.
So I can’t understand how Indian generics are facing this patent cliff, after which, what else do you copy if there are patents to be broken? How can we keep trading at the multiples we are trading at? Same thing with Indian IT that we have these next few years, where we have to create these data sets to make them AI-enabled. But beyond that, the business models have to change from the pyramid structure of IT service companies to becoming a lot more AI enablers and using AI agents and so on.
Q: This is a world market which is starved for growth. Growth is in what you call AI in that sense, very clearly.
A: Magnificent six, because Tesla and Netflix have not kept pace. The others are all 100 billion plus profits.
Q: Let me ask you this, and it’s just something that I’ve asked others as well. Do you think a lack of a pure-play AI kind of story here in India has hurt? If this is the apex technology of our times and people want in, then in that sense, we have IT services, etc, to offer.
A: That’s like a slow decline. It’s like you were in broadcasting, and now the world’s gone to OTT. It’s a slow decline. It’ll still be there. I’m not referring to you specifically, but how a sector like how these ICE engines slowly have decayed in the world as the world has gone to EV is the same thing happening that what worked for us in the last 20-30 years is not going to work in the next 10 or 15. We have to create new growth engines. And I’ve been saying it for the last 10 years, as long as we’ve been speaking, that we need to have a lot more control of IP technology brands.
And so far, for example, you see the auto guys. They are the ones who are playing the game to at least play on technology that they can get into defence, or I saw this Samvardhana Motherson presentation where they’ve gone into the airline they supply to Airbus and Boeing. They can also get into med tech, or they can get into electronics, because they have the core engineering skills to scale. And I’ve seen every country as it grows. When the US grew, it became a technology leader. Then, when Japan came in the 80s, they became the technology leaders, and they were bringing products to the world. Then it was the rise of Korea. Then it was the rise of China. India doesn’t yet seem to have something which can go and be dominant on the world stage. And we kept harping on, we are the service champions, and we sort of missed a trick over there.
Q: But I have to say this, and you would know better, since you meet so many companies. And for example, you brought up aerospace. I recently spoke with the former heads of Boeing and Airbus, and now they’re sort of trying to build up this aerospace ecosystem
A: More as MROs, like for maintenance.
Q: Maintenance, but there’s also aerospace engineering.
A: But who controls the IP then? So the issue is like, say, the Indian IT guys did all the work for the Big Six, but the IP sat in the West. So each of the companies over there makes $100 billion PAT. Our largest company here will be – TCS will not even make a $10 billion PAT. That’s the scale difference of someone who’s doing work as a contractor for someone as opposed to someone who actually controls the IP?
Q: We had that semicon event. The efforts, at least, are being made.
A: You have to start somewhere, like back in the 80s, if you only had ambassador and Padmini, if you did not come with Maruti, and therefore that ecosystem got built. Eventually, you get to an automobile industry of some size. And I did say the coming of Apple in India was that moment for our EMS sector, in the semi sector, that you’ll get years of 40-50% growth. Now it’s like it happened with IT, that you priced it at 200 P/E multiples, and then suffered for many years after that. Some of that is happening even now, and a lot of the action is happening in the unlisted space, where Tatas may be emerging as the leaders over there. Foxconn and others have come and put their own factories over here and so on. But like I said, the value capture sits at the design stage. The money Nvidia makes is more than all these fellows who will make whatever they want for the rest of their lives combined. But it’s a game you have to play. 10 years later, hopefully we get there, but you have to start somewhere.
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Q: Let us just close up this point, world starve for growth, what is your broad thesis, money will keep chasing AI and hard assets? Is that the broad way to think about this?
A: The hard asset bit is about currency debasement, that if they keep printing money, and even now, I’m amazed that the US stocks of interest rate cuts at a time where their inflation target is 2x of their own target. The markets are at an all-time high. Home prices are at an all-time high. Gold is at an all-time high. Bitcoin is at an all-time high, and the Fed talks of cutting rates. If you did that in India, for example, the rupee would have collapsed.
The world has taken note of this, and therefore, all central banks of the world have been shifting reserves away. So gold has now crossed the dollar in terms of percentage holdings of forex reserves of the major economies of the world. So gold’s in a bull market, really, as an antidote to the dollar. It’s incidentally beating our returns for our nifty over 20-year periods. And my colleague, Sridhar, keeps talking about this for a long time, that what India has done is that it has suffered from an inflation and a devaluation problem for years, and by keeping our currency so debased, we’ve effectively killed our domestic market as well.
So let’s say you got a 5% GST cut, but the rupee has fallen 5%, the price of your iPhone or your car has not really changed, so you don’t then get that consumption fillip. So that’s really the risk we run. But having said that, the move to hard assets is something which alternates every 10 years. You go from financial assets and technology to hard assets every 10 years – a recurring cycle. In the 70s, you got this bull market, which went for gold, oil and silver, famously topped in 1980, that was hard assets in the 80s, culminating in the bull market of Japan and Taiwan, which went up 12x in that decade, which was the EM era. 90s – you come back to financial assets, and technology was the NASDAQ. From 2000 to 2010, we got back to hard assets. So the rise of China and India was Vedanta Reliance and the others, which were in a crazy bull market in that period. 2010 to 20 was again going to be back to tech. And that got extended with COVID as they printed money. And then this AI boom came out.
The expectation was that this decade, money would go back to EMs, which was treated as a dead class, like there’s no money flowing to emerging market funds and so on and so forth. China was dead and flat on its back. It started from a very cheap base. And the price performance of all of these in this decade is doing very well.
I saw the CLSA report. He puts out very well. He compared returns of some very fuddy-duddy companies, like tractor supplies to Apple, or, I forget the name of that company, I think Domino’s Pizza, versus Google and their returns are the same, or probably better for the fuddy-duddy companies. So accepting something crazy, like Nvidia, which I haven’t seen in my life, that you go 60x in profits. Or like this premise of Oracle, which itself seems to be based on the premise of OpenAI, will spend the kind of money on you and raise the funding to be able to supply to you. And there are funny things happening there. But if you leave those 5-10 companies out, the 490 companies of the US have not particularly done very well, and therefore the money is rotated even into like Europe, to go and find infrastructure stocks, defence stocks, and so on and so forth.
Q: But your thesis then remains what it was back in April?
A: On a decadal viewpoint, money has to go out from you, can’t be 65-70% of world market cap, that money has to move out. And when it moves out, you go back to hard assets, because you’ve caused an inflation problem, and that inflation shows up as asset prices moving up elsewhere. And those asset prices are – factories are going to be costlier to build just because of these prices.
Q: Let’s get to India for our viewers, and let’s break this down. According to you, what is the price of perfection? Let’s just identify buckets.
A: It’s not a strong view, like I’ve said this before to you on certain shows, that even when at the peak of the IT boom, if you paid a very, very fancy price, you didn’t make returns. So the businesses will do very well. So it includes all, for example, EMS is growing 40-50% no doubt about it, but it’s also going to suck in capital, and therefore they will keep diluting you. And if you’re paying these 100 multiples, 60-70 multiples for them, from a return perspective, you’ve got to be clear, like, what is the time horizon on which you’re in?
In the same way, food delivery as a business is now a $50 billion market cap. So even if you look forward, how many billion dollars of profit do you see coming out of this whole pack over the next five or 10 years? So there are things like that.
Apple markets – it’s like a secular thing. It’s a trend line which continues. But again, there are stocks I also own there. So I better be careful that if you’re paying 35-40 times, and even for the ancillaries, are now priced at 35-40 times and there is fresh supply going to come from the ICICI and the SBIs of the world, who presumably will list their AMC soon, maybe this broadens out and you don’t make those kind of returns anymore from there.
So look, as an investor, I’m doing what you call mergers and acquisitions, at what price would I buy this entire company? And you don’t typically make money by buying very expensive things. And you buy when there’s pessimism. And pessimism may be in different pockets of the market.
Q: So there is pessimism in at least IT services.
A: IT, generic pharma – this is old tech in a way, and unless it transitions to new tech in a way, the value capture, for example, in pharma in the next five, six years, with both biotech and AI coming in, is going to be new drug discoveries coming not from chemicals, but from maybe the biological side. Same thing in IT – we will do a Y2K for the next few years to create the data sets to make them AI-enabled. But beyond that, the business models will have to change substantially. Few companies will do it, and they’ll fall on the right side, but most of them, I suspect, won’t. So that’s also at 20-25 type multiples. It’s not pricing you the risk that you’re running for, like I gave you the example of old broadcasting companies, which slowly got derated down to 10x instead of where they used to trade in the past. So those would fall in that bucket.
So what that leaves, for example, is that I still think financials is the centre of the boom in this period. Capital Market guys are still very good. But when you do this whole consumption play, because I don’t have exports, infrastructure, FDI and so on coming, we have no choice but to kick-start the economy with consumption. But that consumption has to lead to an investment cycle coming back. And for that, the centre of that will have to come back to, for example, there’ll be companies like L&T at one end, and there’ll be companies like SBI at the other end. Unless you see these two participating and performing, you don’t see a very big bull market continuation.
And then the finance minister has finally come back to the magic word of privatisation, where, if the strategic sectors are left out of defence, aerospace and so on, there’s no reason for the government to be holding on to, for example, its metal companies – SAIL, Nalco and NMDC and so on? Why do they have so many PSU banks? Can they consolidate and bring a few of them together and so on? Now it’s a neglected space, so there is some room to be made there. They may or may not be wealth creators unless they go in the right hands, but I remember in the 2000s when privatisation happened and you sat in, see, a Hindustan Zinc, it’s like more than 100x for you.
So there are opportunities in the market, but overall, it’s a market which is very optimistic. Like I said, strategics are out, FDI investors are out, PE investors are out, a lot of Indian promoters have sold their stakes down, and the market is being held by price-agnostic retail flows. And if a mood changes a bit over there, and I hope it doesn’t, then you have to wait for the next cycle where you have similar optimism, which may be three or four years later. So as long as you’re holding with a business with a time horizon now of four or five years, and your return expectations are the normative 15% type for this market, you’ll be okay. But if you’re thinking that what we made over the last four years is going to continue, you’ll be in for disappointment.
Q: You talked about one segment, which is ‘right to win’, in that sense, things like Space India.
A: So in the context of Indians going out to win in the world, remember when the Japanese came, we said the Japanese can miniaturise everything because they’re so tight on space. So they make things smaller, they make small cars, they make small electronics and so on. What is the kind of stuff which India intrinsically has a right to win because the West will otherwise patent and take away, like, for example, we are yoga leaders, but you have power yoga in the West. Now, it’s not something you can take as a product to the world. But certainly, things like Ayurveda can go beyond India? Indian design and fashion, which will then hopefully become a lot more centre-stage in the world.
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Equity investors are there. People will make options. They will look very small today, but, for example, ethnic wear, which comes from India, and there’s a big ethnic population. Then over time, what happens is that it catches on, like how you go out, you like Chinese food and Japanese food, you like Indian food as well. Now, the Indian whole travel and tourism industry in India, the Indian hospitality industry, has some unique advantages. So can some of this stuff become our ambassadors to the world? Because so far, when you go out, you see what they say in Sri Lanka, Indonesia, they call it Baja for the Bajaj three-wheeler. So they are products which have gone out, but there are some of these, Marico, Dabur, Godrej type companies, which have indeed gone out. But you have to see a lot more of these, because of the global market size, whereas the Indian consumer said, after a while, it kind of withers away. So people say, in the US, you can build tall and deep sequoia trees. In India, it becomes a banyan tree, because you have to go into so many categories, like you see Nykaa as well, for example.
Q: So, just to wind up the conversation, last time you said we need a new wealth impulse, and that seems so true that it kind of maxed out on a few things.
A: The game for us for the next 10-15 years, unless we build our own IP and tech and we have our own brands, and we think a lot more about the world than only serving our market. We won’t create the market caps, the big wealth creators of the past also, first, you made it out of privatisation that whoever took over what the government was doing, and you may still see that happening with Adani and Jio and so on and so forth. The second was about people who went out like Infosys and the Sun Pharmas and so on. If you’re not in this kind of mix, you don’t become a gigantic company. Real wealth creation is when you buy something and you can sit on that trend for 10 years. You don’t become that large. So today, it seems to be the capital market space, but that’s not big enough. In the same way, this organisation of blue-collar people, we’re giving the market cap, but the profit pool, I’m not so convinced that it’s going to be that large enough.
Q: Foreign investors are in big sellers’ money. Do you see them coming back?
A: When they see growth, they come back. So when they come back in primary deals, they see good companies, they come back. Investors are, look, we are not political. They don’t care about countries. They care about returns. If you see a return, even in China. The same Americans have gone to China.
Q: How far out is growth coming?
A: Growth is a function of valuation comparison. So if the problem is, if you get 25% growth in the US on 20 multiples, and you’re getting 20 multiples in India for 9% growth, why would you put money here? So that’s the challenge. One has to either grow or pick up a valuation. Either valuation goes sideways, and we get cheaper, relatively.
Q: Broadly, what I’m hearing is perhaps some more time for correction may continue.
A: I’m a buyer always, so I hope for a timDisclosure: Reliance Industries Ltd, which owns Jio, is the sole beneficiary of Independent Media Trust that controls Network18, the parent company of CNBCTV18.com.
e correction. But usually markets don’t give you that chance, so they will tend to then correct and throw you rolling opportunities in different sectors, like it, for example, happened in textiles, when the tariff thing happened, things got sold off. And if you can look beyond the hump and say, okay, it’ll get solved in six months or a year, maybe an opportune time to have looked over there.
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