Speaking to ET Now, Arora said MSCI India has risen 5.5% in the past two months, even as China has fallen 6%, emerging markets are up just 1.8% and the US markets have gained less than 2.5%. “In dollar terms, India is one of the best-performing markets right now,” he said.
‘Smallcaps will catch up: The turn has already happened’
The muted feeling among investors, Arora said, is because portfolios heavy in smallcaps haven’t yet reclaimed earlier peaks. But the broader market has already stabilised and reversed.
“Our midcap fund launched in March is already up 30%. The midcap index is up 20% in the same period. The rally has happened — it’s just not visible if you compare with 2024 highs,” he noted.
Arora believes broader participation will return once FIIs reduce selling pressure and domestic demand, boosted by reforms, begins to flow through.
Reforms fuel the market: GST cuts, rate cuts, income-tax relief
Arora attributes the market’s improving tone to the government’s recent reform push:
- GST rate rationalisation
- RBI rate cuts
- Income-tax cuts
- Tariff-related adjustments
“These changes feed into consumer finances. They may not show up in a particular company’s earnings, but they strengthen the household balance sheet — and that supports the economy,” he explained.
Why he’s avoiding exchanges and broker stocks
Arora remains cautious on capital-market plays, particularly brokers, exchanges and depositories, despite BSE and MCX soaring in 2024.
“Speculative volumes are too high. Regulators don’t like it. After Covid, trading volumes multiplied 10–15x — that’s unsustainable,” he cautioned.
He believes these businesses will have to “moderate, correct and then grow steadily,” rather than continue rising in a straight line.
Long-term winners: Asset managers, core financials
The part of the capital-market ecosystem Arora likes: asset-management businesses, which benefit from disciplined investing and are structurally supported by the system.
He expects largecap financials to remain strong as FII outflows ease, and anticipates a further broadening of the rally into midcaps and smallcaps thereafter.