FII selling could worsen, but not because of India's macros: Enam Holdings' Manish Chokhani

How are you viewing markets amid volatility?  

The US has reached a stage where current account and fiscal deficits are unsustainable. So, Trump is trying to solve the current account problem by reducing imports and trying to fix the fiscal deficit with his policies. The basic premise is correct, but the way they’re going about it is absurd.  

We call it this way: the US used to be the big brother to the world, and now he has become the cousin who is fighting. In this uncertainty, you do not want to hold the dollar, make investments, buy equipment from them because there may be a kill switch. It changes the rules of everything. 

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It is a reset for the whole world and not business as usual. He is hoping things turn out in a certain way—that the economy slows and they can refinance interest rates later this year or next year. But human beings and countries tend to behave differently, so it is very uncertain. But the fact is, the best investor in the world chose to sit on over $300 billion in cash. That tells you people have been anticipating that something is going to go crazy.  

What are your thoughts on the entire discussion on computing the formula for tariffs?  

I will say what others are saying. It is like sixth-grade mathematics. It is the most absurd number. ‘What is the deficit divided by that fellow’s exports?’ and you come up with a tariff number. But if Trump says, ‘I want to charge you 10%,’ even to Germany—which has just a 2% tariff to the US—who’s going to argue with him? He’s the customer at the end of the day. 

It is the same as India's tariffs. We did not allow cars, scotch, whisky, or Harley Davidson and put tariffs we wanted. If the customer wants it, he will buy it, and if he does not, the goods will not come. And the US wants the consumer to slow down. One cannot run this kind of current account deficit if they’re consuming like there is no tomorrow.  

Trump has indicated that the pharma sector could face tariffs like never before. Traditionally, investors have viewed sectors like pharma and packaged consumer goods as safe havens. Does that perception still hold true? 

We have to remove our assumptions of the last 35 years. To say pharma sector or packaged consumer goods sector is safe—it’s also a function of valuation. Packaged consumer goods is a safe haven business, but the valuations are not safe. 

Take pharma. The reason Trump is threatening tariffs is because most global supply chains ultimately run through China. Even though Indian pharma companies export heavily, they are still dependent on China for key raw materials—specifically pre-APIs (active pharmaceutical ingredients). India typically adds value at the formulation stage before exporting the finished generics.  

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He wants to alter the entire supply chain for pharma. But factories do not get built in six months, they take two to four years. It is a long-term process and by that time, Trump may be out of power. So, will someone even put up a factory on the assumption that this supply chain will last? We do not know. 

Do you think the Nifty has bottomed out for the year? 

I do not know. If something more stupid is unleashed globally and that causes another round of foreign selling, who is going to absorb it? We are not a large export economy, so it does not make a big difference in our lives. But flows matter, and if markets are tumbling everywhere, we can not be the only one standing. 

Could foreign institutional investor (FII) selling worsen going ahead? 

It is possible. Think of it like this—if we have a problem in Mumbai, you will sell your stocks in Sri Lanka. In the global context, we will be Sri Lanka. If you are blowing up, you extract money from wherever you still have a profit, which are Indian markets.  

So you're saying FII selling may not be due to India’s macros? 

Exactly. It is more about how global funds operate than India’s fundamentals. For instance, if interest rates rise in Japan, it can trigger an unwinding of the carry trade—where investors borrow at low rates in Japan and invest in higher-yielding markets like the US. Now, let us say the US stocks fall 30%. They still owe money in Japan, so they need to raise cash. But they can not sell US assets at a loss—so they start selling where they are still sitting on gains, like in India or Germany.  

What are the risks you see? 

Private capex. See, we tend to think in three, six, or 12-month timeframes. But someone setting up a factory is thinking five to 10 years out. Do they move now or wait? They are unsure—because they do not know how tariffs, supply chains, currencies, or taxes might change in that time. On what basis will you present a project to your board? 

In this kind of uncertainty, decisions get delayed. That is why earnings do not suddenly explode—they take time. Honestly, the best-case scenario might be that we just move sideways for a while, consolidate, and build a solid base. 

Also Read: Mint Explainer: Global and Indian markets crack under Trump’s tariff shock—what this means for investors

There is a saying: in bear markets, stocks return to their rightful owners. In bull markets, you are just renting them. Right now, they are going back to the real owners.  

And in terms of diversification—gold and silver hitting highs. Should investors park cash there? 

Yes. Gold has done as well as the index over 20 years. It has gone up 45% in the last two years—we cannot be doing that now. But the next 10 years look inflationary. So, it should be a period of hard assets—factories, gold, precious metals. I also feel a lot of nuclear reactors are coming. Uranium is scarce. Things like that could be interesting. And they are usually ignored in the last cycle, which is often where the next leaders come from. As an individual or family, have some fixed income, a rainy-day fund, some gold, real estate if possible. And then take your chances in the market—that is where wealth is created.