“As I said, normally FIIs buy. This time you can give some reason,” Arora explained, adding that earlier outflows could be attributed to specific geopolitical and policy developments. He noted that real selling by FIIs began around September 2024, coinciding with renewed optimism around the U.S. economy following Donald Trump’s return to prominence.
However, according to Arora, that optimism faded after “the March, April decline because of tariffs and the policies which seem to be not consistent or not stable.” This led to widespread selling in the U.S. markets, creating opportunities elsewhere.
Citing data, he said, “Year to date, the S&P must be up in the range of 13-15%, and the world excluding the U.S. is up some 25% this year.” This, he believes, underscores that investors who chose to diversify away from the U.S. did not lose out on returns.
“If you do that, then India also has a logical claim to that money,” he noted, suggesting that India’s relative strength and stable fundamentals make it a natural beneficiary of global reallocations. Arora added that India’s earlier outflows were tied to tariff-related tensions and a perception that the country had fallen out of favor with the U.S. “If that changes, I think you will get flows,” he said confidently.
Arora, who describes himself as bullish for the past few months, added that even if FIIs don’t turn heavy buyers, stability itself will aid market sentiment. “They do not even have to buy a lot. If they just stop selling, that will be enough,” he remarked. He expects returns in the range of 10–15%—aligned with India’s corporate earnings growth—calling them “reasonable and fair.”
Good Days Already Here, Says Arora
Responding to a question about whether the market’s good days are just beginning, Arora maintained his optimistic tone. “I have been saying good days for the last many months,” he said. He pointed out that September saw a 2–2.5% rise in NAVs, while October has already delivered 5–6% gains.He emphasized that FII selling has subsided, and “it is clear that there is some progress on the deal” between India and the U.S. Although the market was slightly disappointed by reports that “Prime Minister Modi is not going to Malaysia,” Arora believes that such short-term reactions don’t change the broader trend.
The coming months, he added, are seasonally strong. “Year-end is always generally positive for markets—November, December, January are generally always positive,” he said, citing supportive factors such as GST reforms, tax cuts, interest rate reductions, and curbs on speculative activities.
While he doesn’t foresee spectacular 20% rallies, Arora expects steady gains of “10%, 12%, 15%” depending on stock selection. Citing his firm’s midcap fund launched in March, he added, “Who would have thought some great time, it is up some 28%.”
For investors, he suggested that the key is not to regret their asset choices: “Broadly you are making enough to not feel that you could have done something else with that money… maybe other than gold you are broadly okay in life.”
On Gold: A Hedge, Not a Bet
When asked about gold, Arora reiterated his long-standing view of it as a limited hedge rather than a primary investment. “I have always liked it but I am not saying buy it, but you can keep it,” he said. His global fund holds around 5% in gold, while his personal allocation is 8–9%.
He revealed that his conviction in gold dates back to 2008 when he even bought physical bullion for safekeeping. However, he cautioned that “this price seems a bit too much too fast.”
According to Arora, holding some gold acts as insurance against a weakening U.S. dollar, driven by rising fiscal deficits. “Even the Federal Reserve governor said that the path is unsustainable,” he noted, adding that the only eventual way out could be dollar depreciation.
Citing prominent voices, Arora said, “Ray Dalio wrote a whole book basically on this… then you saw Elon Musk having a fight on this basis that this is unsustainable.” For investors exposed to the dollar, like NRIs or global fund managers, he recommends a “5–8% insurance” in gold.