Blackrock Sees Indias Comeback Story Just Beginning As Oil Prices Collapse

TITLE: BlackRock Sees India’s Comeback Story Just Beginning As Oil Prices Collapse | Ben Powell | ET Now CHANNEL: ET Now DATE: 2026-06-25 ---TRANSCRIPT--- Now welcome on board. We’ve got Ben Powell, chief investment strategist for Middle East and APAC at the BlackRock Investment Institute BlackRock joining in on the show right now. Ben, hi. Great to have you on ET Now once again. Good to be speaking with you. Uh Ben, the world has changed since we last spoke and now there seems a resolution at least to US and Iran and that big oil artery for the world has finally been unblocked. Um tell me how is it that you’re looking at the world and how macros will shape up from where you stand right now?

Uh good morning. Great to be with you. I’m looking at the world with with optimism and relief, frankly. I’m based here in the United Arab Emirates and you know, we’ve had some difficult moments over the last several months. But to your excellent point, it really looks like things are improving. I always want to be careful cuz we don’t know what happens to but it is a fact that we are seeing out of my window here. We are seeing uh the tankers start to flow, the oil start to move and that’s being reflected in prices. So oil prices now all the way back down to before the war. Uh there’s a prospect from here that we could have something of a I don’t want to say excess supply but we could have some of the kind of work around the pipelines. They can continue for some period of time and the tankers start flowing or continue to flow, let’s say. So I think as you say, a lot has changed but critically for my part of the world here in the Middle East and if I can say so, also for significant energy importers of which India would be one, things look a lot better. I would even say quite rosy looking forward if this can continue. Since you did talk about India, I want to talk about India in particular. Would you say that that peace premium is already in the price while we still await FBI and FII flows back into Indian equities. Uh Uh not even close. No, obviously India’s had a pretty dull year or so, not terrible, but India, as everyone on this presentation will be aware, has has sort of suffered by doing nothing wrong really. India perceived not to be at the forefront of the AI trade, and I guess the wrong side of the AI correction, the wrong side of the energy problem. The energy normalization is very huge for India clearly, and I think can give a tailwind which is only just beginning. Valuations look very inexpensive by historical standards. So, we’ve seen the foreigners start to buy Indian equities just in the last few days. I think this is really not even the first inning. I’m using a baseball, not a cricket metaphor there, by the way. I think this is not even the first inning of the recovery when we can see the foreigners come back, confidence recover, and then in the normal way, higher prices will create confidence which will create more buying. I have to say I’m pretty constructive India tactically over the next several weeks or months cuz I think we’re only at the beginnings of the of the normalization, and if you like, the rediscovery of India by foreigners to come back into the growth story which is very real and ongoing. Ben sitting out of India, that’s extremely heartening to hear. Hi, this is Harsha. Ben, give us a sense. Is it only crude driven? Is is the dollar at all possible concern because we’ve seen a bit of a spike on the dollar index? Could that play spoilsport? Uh how are you viewing some of those developments? Uh I think the energy story is very very important. There’s more to life than energy prices, but they’re kind of a big deal. So, I don’t want to kind of duck that bit. That is definitely central. You know, when we obviously as the world’s largest global investor by far, when we look around the world, uh you can cut the cake in many different ways, but frankly, some people benefit from higher prices energy prices and some countries don’t. Uh this relief oil price is down a lot uh is extremely useful for India, that’s for sure. So, the other part of your question, higher interest rates uh in general, so inflation hanging around, Fed probably can’t cut, maybe even hiking a little bit. That’s clearly a little bit of a headwind for global risk including in India. And what that means is we’re all going to have to work a bit harder and really identify those parts of the equity market where earnings can be a sufficient tailwind to offset that slight headwind of uh globally a high inflation. I should say as per RBI governor yesterday, actually the inflation situation in India actually not too bad, so it feels like the RBI uh is a little bit uh waiting and seeing, I guess. So, I don’t think the interest rate headwind is going to be so severe in India directly. Globally, to your points, maybe a little bit, and that’s why we need to be very careful picking our spots, really focusing on the the fundamentals on earnings where we feel they’re resilient and strong and can offset any headwinds. Ben, if at all FIs were to come back in significant fashion back into India, uh will it be the the old school, the banks, the IT names which will come come back with a stronger kind of fervor, or will it be some other sectors which they could well look at as well? And uh give us your take on on where the flows will come in. I think banks for sure. I think people uh how can I say? We we want to buy India mainly for the sake of India, the long-term growth story, double-digit number of GDP growth, all of that stuff is still true. It just got obscured a little bit by that uh inconvenient combination of the energy problem and India being perceived as not the forefront of AI. Again, I always said don’t think India did anything wrong. It just got caught the wrong side of those two global big trends. When I look at India now, yes, I think the kind of domestic plays that are getting into that growth I should do well. It includes banks, perhaps a touch of construction, and I think a theme that we’re going to continue to see not just in India, all over the world actually, is what the Chinese call self-reliance. So, this kind of need for all countries to have our own kind of capability, be that energy, be that defense, be that technology. So, I do think kind of plays that can be aligned with that self-reliance, made in India, there’s kind of different formulations of that thought, but I really think in a complicated world where sadly we all feel less able to rely on the global kind of supply chains, markets, stocks, sectors that are getting into in this case India becoming more self-reliant, likely to be beneficiaries as well. Interesting, but you continue to stay overweight on US equities. Wanted to understand what’s the premise, what’s the rationale, and what or rather how long do you think your conviction will hold? Uh for now, look at the AI super boom. I I know we all want to talk about something else, but that’s for sure, but it is real, it’s ongoing, and it’s probably a hinge moment in human history. So, the US for better or worse since at least the Second World War is where the future gets discovered and monetized to a large degree. Not only the US, there are many interesting international investment opportunities, that’s for sure, but to your question, the US continues to be the center of the world’s perhaps most exciting trend right now, which is the reality that intelligence is becoming something like ubiquitous, Kind of amazing. The US companies again, let’s come down to a more practical level. The earnings we are seeing driven by that AI mega force are very real and companies actually continue to surprise to the upside. So the story so far, you’re right. We’ve been bullish. That’s been the right call. But as a broader comment, the market continues to underestimate demand for the AI and the related kind of ecosystem chips and so forth. We are still not bullish enough it would appear. So we keep on with that US overweight. So for now, it’s working and we think it can continue to work. Ben, there’s been the SpaceX IPO. There’s OpenAI filing as well. Is AI capital super cycle you think just getting started? Yeah, look capital markets are so cool, right? So capital markets allow savers to save for retirement and companies to create the the future. Whether that’s curing cancer or taking us into the galaxy. So I’m kind of pro-capitalism. By the way, since the the biggest capital market by orders of magnitude continues to be the US. I think many of us around the world, different countries are thoughtful around that and obviously we at BlackRock believe capital market development is kind of very very important for uh for economies, countries and societies frankly. But for now, the US is very much in a league of its own and we’re going to continue to see markets what they do which is funds the future while help helping people save for retirement which again I happen to think is kind of super cool. Mhm. And Ben, you know, you’ve called AI as more of a macro force. Uh the higher rates that that we’re seeing now and likely to sustain from a macro perspective, do you believe AI as a trend will likely eclipse that and and growth will continue to to be strong given the fact that AI is going to be a macro force? Yeah, you raise a very interesting kind of struggle, I guess, to some degree in the market. There’s a sense or a debate, is AI disinflationary or inflationary? Our strong view is in the first instance, it is inflationary. We’re seeing more demand than supply. So, sure, we might have a future abundance and great times. That’s fine, but before we get there, we’ve got to build a thing. We need copper. We need We need uh plumbers. We need data centers. And the money that’s pouring into this ecosystem is so huge that for now, AI is going to be inflationary, we think. And that’s starting to I think become clearer in the data. And that’s another reason why the Fed is a little bit wait and see and is of course very conscious that as a matter of fact, inflation has been above target in the US for something like 5 years now. So, the Fed needs to of course needs to reflect uh both sides of their mandates, including the inflation side. They’re doing that. They will continue to do that under a war show uh leadership. I think that’s for sure. And then the question again is just good old-fashioned earnings. Which part of the economy, which part of the sector of the market can we see the earnings continue and not just continue, but continue to depositively surprise? AI as a general statement is is is uh part of that, but we need to be a bit clever, right? We need to be very thoughtful on exactly what we mean by AI. Being bullish AI is fine at dinner parties, but in the workplace, what exactly mean? What exact companies are we talking about? Is obviously where we spend uh 28 hours a day, 9 days a week. So, so Ben, again, coming back to the 10-year yield, therefore, uh and as well as the Fed funds rate, uh where should one and how should one see the impact of AI on some of those uh in terms of the macro? Well, now it’s inflationary. So, again, we think AI is an inflationary force. Where we get to in 10 years, it is hard to say. So, so that is uncertain and I understand some of the disinflationary arguments. We’re going to have robots, it’s going to be awesome. But for now, the AI super boom, as per the previous question, we are raising billions, hundreds of billions of dollars from capital market that’s going to pour into a very tight supply relative to the scale of demand. That’s going to be inflationary. The Fed has to respect that. They can’t just skip forward 10 years and kind of hope for a good outcome. The Fed needs to manage reality. The reality is that the inflation is high relative to their mandate. And of course, they need to be very cognizant of that and manage their their rates accordingly. So, Ben Wallach is driving the buildout. But who is going to actually win? I mean, is it going to be hard hardware? Is it going to be hyperscalers? Or will it be the application layer, perhaps? Hopefully, we’re all going to win. So, again, the joy of capitalism is it doesn’t need to be zero-sum. We can see winners kind of across the board, not least at the societal level. But to your point, what we need to do again, we can’t just be bullish AI. We need to be very specific. So, what we’re trying to do on a more tactical basis is to be extremely aware of the relative valuations as they change over time and to try and pick our spots up and down the whole AI stack as to where it at any particular moment is is kind of the most attractive. So, that’s true within the equity space, some of the sectors you just mentioned, be it chips, be it the hyperscalers. I’ll just say in passing, it’s also true in other asset classes. You know, you can get all the way down to the level of the copper wiring, for example, and think about the kind of commodities implications for this super boom because we think they’re real we think we are in the very very early stages. I mean intelligence is such a weird concept. It feels likely to me at least that we’re not going to tire of intelligence. We’re always going to want more and so this is potentially something of a structural change rather than just a kind of short-term temporary cyclical boom bust. We think there’s more to it than that. Hmm. Ben, I’ll switch back to India because some of those arguments that you made were compelling, but I’ll try and play devil’s advocate here. Uh you know the the perennial argument that we’ve heard over the last year or almost a year and a half now is one AI India has missed the AI trade. That’s one. And second, uh with the rupee weakness, uh there continues to be a sense of uh a caution towards India. Uh none of those seem to be going away in a jiffy. So, are you saying that it’s only the energy which is likely going to aid foreign investment into India or you believe that the AI cycle itself has peaked and now the focus will turn towards real-world economy beyond AI? A little bit. So, I’ve spoken at length about energy. It’s important. But let me take the AI question more directly. The the I think the interesting thing for India is can India become a user of AI? So, for sure India will have its own plans around becoming if you like a supplier maybe having its own data centers and so forth. So, I think that’s true and important. But India clearly a very young, dynamic, extremely tech-savvy workforce. This is one of the reasons global investors have liked India for a long time. That’s true. So, I guess the challenge for India as it is for all countries all over the world is we can use how the Indian workforce can use this magical technology to become more productive at a kind of macroeconomic level. But then at the micro level, at the individual company level, which companies can harness AI to become more productive, driving earnings. That’s the lens we need to bring to bear as investors. And our best at BlackRock, the world’s largest investor by far, is that many Indian companies will rise to the challenge. So, that’s what we’re looking for is specific evidence of AI as a kind of productivity-enhancing tool. Sure, at the society level, but also at the micro, meaning individual company level, that’s what we’re really paying a lot of attention to. And earnings growth, Ben, is that at all one of the challenges that India will likely overcome FY27? Will earnings surprise on the upside? Will growth surprise on the upside, according to you? I think there’s a good potential there. I think what the challenge we’ve had over the last couple of quarters is the, if you like, the opposite. We didn’t really trust the earnings, if you know what I mean, right? We just were they were going to get getting keep nudged down, nudged down, largely because of the the exhaust of the shock of energy. If that is over, and it looks hopefully, again, I’m nervous to say it, but it looks like we’re in a much better place on the energy side, then yes, I think we can start to rely on those earnings forecasts as becoming more credible. And in the first instance, I think that’s going to be enough to encourage foreign capital back in. And then hopefully in a quarter or two, we get the confidence return that can create its own own uptick. I think I’ll be talking to you about that in maybe a quarter or two’s time. For now, it’s just earnings stability and kind of being able to trust the numbers. I think that’s going to be enough to re-entice some of the foreigners back into the market. Sure. The other thing, Ben, I was curious to ask you, and and given the kind of headlines we wake up to in terms of what’s happening in Bitcoin and especially gold and silver, what’s a good hedge right now? That is a very hard and important question. What I would say is the old portfolio won’t get it done. So, have in our assessment, having a kind of traditional just if you like just in equities bonds makes is probably not going to get what we want what we want to happen. So, I think investors all over the world need to be very open-minded to our so-called alternatives, be that property, be that gold, be that even some of the cryptocurrencies. And I think one other point I would make is the era of the everything bull market is over. So, when interest rates were very low, a rising tide lifted all boats, and we just needed to be long everything and go to the beach, and that worked very well. In a world where inflation is a problem, you’re going to have a higher cost of capital, interest rates are higher, and some companies will fail to achieve their cost of capital capital, whereas some companies will flourish. So, one other point I would say for investors trying to work out how to manage this new investment environment is we all need to have a more active approach to investing. Sorry, it’s going to be a bit more hard work. We’re going to be We’re going to need to be more sophisticated than just being bullish. We’re going to need to be very focused focused in a more active way, which sectors, which companies can have the earnings to offset some of these challenges, be they geopolitical, be they inflation interest rates, cuz I think the world feels better today vis-à-vis the Middle East, but it is still complicated, and we need companies to perform driving earnings. So, we’re going to have to be more selective and more active, and that’s a big mind shift mindset shift, by the way. And Ben, you know, what continues to possibly again be a drag to India is that some of the peer markets continue to outperform both on valuations. I mean, they’re they’re far they’re trading at far lower multiples and growth given AI. And And that may that may continue maybe for a year or two. How do you reconcile that? I I I India uh growth in India, uh at a scale of India’s almost continent-sized economy is, of course, completely unique on the planet. So, I think India shouldn’t be too worried about the outlook for India. The growth story very well understood, largely driven by demography, also driven by the, you know, again, everyone watching this is extremely aware, maybe some of the foreigners less so, the amazing strides in productivity, digitalization, all of that stuff is still true. I just think it got a bit obscured, again, by the the kind of excitement in career in Taiwan and the energy problem. India didn’t do anything wrong. Now that some of those global macro challenges seem a lot easier, we can get back to the the bread and butter of India’s growth story, which is real, ongoing, and should drive, again, with an active mindset, we want to pick our spots, but absolutely there should be some companies and sectors who can flourish in the India Indian equity market in the months, quarters, and years ahead. Okay, Ben, such a pleasure speaking with you. Thanks for joining in with all the insight. My pleasure. Okay, then.