JP Morgan's Vis Raghavan At Davos WEF 2024 | NDTV Profit - video Dailymotion

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#NDTVProfitAtWEF | #JPMorgan's Vis Raghavan in conversation with Niraj Shah on the sidelines of #Davos2024. #NDTVProfitLive #WEF

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00:00 It turned out to be quite different from how the year ends.

00:03 2023 was a classic case in point.

00:04 But I'll still ask you from where you're sitting right now, how do you see the world of risk

00:08 assets in 2024?

00:09 I think it's going to be a choppy year.

00:13 Factor in a lot of volatility.

00:14 A lot of the volatility is going to be driven by geopolitical factors.

00:17 I think never have geopolitics become so entwined with the day to day.

00:24 So even if risk assets want to perform, I think geopolitics may have different plans

00:29 in mind for those assets.

00:30 So I think the concern forefront in investors' minds is how does the geopolitical landscape

00:37 navigate itself?

00:39 And add to that one more nuance, over half the global GDP is going to be going to elections

00:45 this year.

00:46 So that's not necessarily a bad thing.

00:49 There may be positives or negatives coming from it.

00:51 But clearly, there are a lot of extraneous events that will shape markets this year.

00:58 Is the world learning to live with geopolitical risks?

01:01 I mean, say, come 2020 or 21, if we were told that there will be two major wars continuing

01:08 or two major conflicts going on at a point of time when interest rates are volatile,

01:13 etc., one would have thought that risk assets would be at the valuations that they are at.

01:16 Is the world learning to live with geopolitics now?

01:19 I wouldn't say learning to live with it.

01:24 If you look at where we were, so you had COVID, you had a tremendous influx of liquidity through

01:33 central banks and finance ministries, over 21 trillion dollars being pumped into the

01:40 system.

01:41 2021 was a liquidity-fueled bonanza.

01:44 So every asset saw the ripple effects of all the liquidity in the market.

01:49 Then you saw that liquidity slowly being drained.

01:56 But then you had the war in Ukraine.

02:00 And along with it came inflationary pressures, supply chain concerns, which effectively meant

02:06 you saw rates having to rise quite dramatically.

02:11 And just when you thought things were OK, we will try and normalize, you saw the events

02:17 in the Middle East.

02:19 And a couple of points I want to point out.

02:22 A lot of the market feels that maybe the inflation battle is finally drawing to a close, 3% globally.

02:30 Maybe the journey from 3% to 2% is going to be more painful, but 3% is kind of habitable.

02:37 And maybe rates have also kind of stabilized, global rates, the US rates and Eurozone, etc.

02:43 And then you see what is happening in the Red Sea.

02:47 And if you look at what's happening in the Red Sea, you have roughly 15% of global seaborne

02:53 trade goes through the Red Sea.

02:56 8% of grain trade goes through the Red Sea.

02:59 8% of seaborne oil goes through the Red Sea.

03:03 Then you've got natural gas going through the Red Sea.

03:06 So imagine if that whole zone becomes paralyzed.

03:11 Imagine what it does to inflation, what it does to supply chains, what it does to energy

03:14 security.

03:15 So I think this thing never seems to go away.

03:18 And to a point, I think geopolitics is going to continue to feature.

03:24 And that could really kind of thwart a lot of the progress we've made so far.

03:29 The sun is really beating down on you, so therefore my hand here.

03:31 But we hope that the sun continues to beat down because it's really cold otherwise.

03:35 I thought you put your hand up in confidence in all the problems that we're facing.

03:39 Not at all.

03:40 And so the other aspect is, what does such an uncertain climate or world mean for dealmaking?

03:47 Because when I speak to dealmakers back in India, at least, about how 2023 shaped up

03:51 for them, right, or for the world at large, most people seem to believe that it was a

03:55 tale of two halves, so to say, globally.

03:57 In India, maybe a lot less than the world.

04:01 From where you are sitting, how do you see what happened in 2023?

04:05 And does that have any impact on what 2024 could be like?

04:10 So I didn't think last year was a tale of two halves.

04:13 It was a pretty grim year.

04:15 So the global investment banking fee pool for all the banks is around $80 billion every

04:21 year.

04:22 That's the steady state run rate.

04:24 In 2021, on the back of all the excess liquidity I talked about, it hit $135 billion.

04:30 That's a high watermark.

04:32 Last year, the fee pool was $66.5 billion.

04:36 So that fee pool was over a near decade low.

04:39 I mean, you have to go back to the financial crisis to see a fee pool so bleak.

04:45 There are however reasons why activity could bounce back.

04:50 So one of the biggest drivers of activity is going to be private equity.

04:54 So private equity, venture capital funds, PE funds globally, are sitting on $2.5 trillion

05:00 of firepower, which they are motivated and incentivized to deploy.

05:05 So they will gather assets.

05:08 They're also sitting on around $120 billion of secondary shares, secondary holdings, that

05:14 they will get out of because these are IPOs that have happened, some underwater, but they're

05:19 not in the health to maturity kind of mindset.

05:21 At some point, they will divest of those assets.

05:25 So I would say there are factors.

05:28 And if you look at kind of corporates, and if you look at valuations globally, including

05:32 in India, valuations are at pretty healthy levels.

05:38 I'll use the word healthy.

05:42 And if you have a healthy valuation, with healthy valuations come a responsibility.

05:49 Responsibility to show earnings growth, to show earnings momentum, top line, bottom line,

05:56 share price momentum.

05:58 And if that is not going to come organically, it is going to come through acquisitions.

06:02 So there are drivers which allow you to kind of partake, some out of necessity, some out

06:13 of desire that will encourage corporate finance activity.

06:17 The headwinds are back to geopolitics, because there is uncertainty.

06:22 So if you're on a board, the question is, do I need to go now?

06:25 What is coming?

06:26 Or should we just kind of put our head below the sheets and wait for a better day?

06:32 So do I pause and wait for some clarity?

06:35 And then the other kind of reason why we sing a bit of lull is given all the drive to nationalism,

06:47 French shoring, near shoring, national security and the like, you're seeing the deal gestation

06:54 periods for referrals, antitrust, et cetera, are getting longer, because there are more

07:00 referrals, there's more scrutiny.

07:02 So a deal that would have typically taken 12 months historically may now take 18, 24

07:07 months or longer.

07:08 So if you're a board of a target company, you question, do I want to subject my employees,

07:15 my company, my shareholders, my customers to that prolonged period of uncertainty, not

07:21 knowing whether this thing will in fact close or otherwise?

07:25 So I think there's a lot more caution and kind of there is more introspection around,

07:33 do you go, don't you go?

07:35 And when you kind of factor in the geopolitics and the global macro uncertainty, the tendency

07:42 is let's wait and see.

07:45 So I would say there are a lot of drivers that are fodder for activity, and then there

07:51 are a lot of headwinds that kind of say, hey, pause.

07:55 So that needs to be.

07:56 And then the biggest final kind of hurdle is the valuation bid offer between buyer and

08:02 seller.

08:03 So there is in one pocket still a bubble mindset where they say, oh, my stock used to be there

08:10 in 2021.

08:12 But 2021 was a mirage, forget it.

08:15 The world has moved on.

08:17 And I think that valuation is coming together.

08:22 You see more and more of it.

08:24 But that bid offer is narrowing when it was this far apart at the beginning of the year.

08:30 So I'm tempted to ask you, you mentioned a few factors and I'm trying to place India

08:34 out there.

08:35 One, the depth of the markets improved.

08:37 So the tape showed that FIIs can exit or investors can exit in large quantities if they want

08:42 to.

08:43 Two, geopolitical stress and political uncertainty.

08:46 If anything, India is probably the oasis of calm out there, placed strategically geopolitically

08:52 and political continuity or policy continuity seems to be a higher probability, if you will.

08:59 And growth as well.

09:01 Maybe if not an oasis of growth, then certainly amongst the larger economies, arguably the

09:05 fastest growing economy.

09:07 Does this all auger well for dealmaking, risk asset valuations, etc. in India?

09:13 Or is that point of valuation, healthy valuations, a bit of a hindrance there?

09:18 Look, I think this is, you know, it augers exceptionally well.

09:24 This is as a proud Indian, this is, you know, this is India's moment.

09:30 This is India's chance at a time when the world lacks an engine room for global growth.

09:38 India is very much that engine room.

09:41 And I was looking at, you know, our economist kind of global growth matrix.

09:46 And India is right up there in terms of, you know, its propensity to grow.

09:51 And it's not just, you know, sporadic growth.

09:54 It's sustainable growth year on year on year on year on year.

09:58 And I think this really is India's moment.

10:01 So to your question around, you know, is this growth kind of organic?

10:10 Is India caught by any of the, you know, on the cross wires of any of these global geopolitics?

10:17 Thankfully not.

10:19 It's kind of steered, managed to navigate itself, you know, exceptionally well.

10:24 So I think this is India's golden moment.

10:27 And at a time when, you know, it's a net beneficiary of kind of global supply chains being rejigged,

10:36 whether it's French or near shore, you know, that theme, India is going to be a beneficiary

10:40 along with clearly Mexico and Cambodia, Vietnam, a lot of countries are beneficiaries.

10:44 But India is a beneficiary at scale of that of that whole exercise.

10:50 And look, I think it's, it is, you know, the leadership is excellent.

10:56 There is political stability.

10:58 The policies are excellent.

10:59 So I think, you know, it is, you know, as you say, it's yours to lose.

11:04 So it's ours to lose.

11:06 One final question, then, therefore, we've been hearing about, you know, companies wanting

11:10 to, I mean, services has always been a strong point, but manufacturing in India and manufacturing

11:16 India for the world as well.

11:17 Now, the talk has been on for a while.

11:19 One can argue that maybe because services, FDI came off, that the FDI numbers are not

11:24 quite showing that.

11:25 But every conversation that I've had this year, as well as last year with global corporations,

11:28 we're talking about increasing the pie of India for India and for the world.

11:34 From conversations that you have, because you'll be talking to a lot many more.

11:38 Is that about to happen?

11:40 Is that a steady process?

11:41 Or will it actually pick up starting 2024, 25, maybe?

11:45 Look, which is why my emphasis on India's growth being sustainable growth.

11:49 So this is not a kind of a flash in the pan.

11:52 You know, this is something which is, you know, very endemic.

11:56 It's here to stay.

11:57 So FDI interest, you know, absolutely prides itself on that sustainability of the growth.

12:03 So it is more medium term, long term, as opposed to something which is short term.

12:09 On your question around, you know, making India or manufacturing in India, typically,

12:15 you know, there was a lot of competition between India and China for that manufacturing element.

12:20 There is India, you know, excelled in the IP, the software and the, you know, the more

12:28 service end of that spectrum, the manufacturing end of the spectrum, whether it was, you know,

12:34 the inward interest, whether it's quality control, whether it is, I think that bogey

12:38 has been busted.

12:39 We are getting really good at it.

12:41 I think, you know, that quality control and, you know, and now you have the broader macro

12:47 theme of necessities is the mother of, you know, of invention.

12:52 So fundamentally, that flow is coming our way as part of this, you know, global reshoring

12:57 theme.

12:58 So, you know, we better be there to receive it.

13:02 So if you know what I'm saying, it's kind of a, so there are, you know, both internal

13:07 and broader external factors that make India a net beneficiary in this kind of, you know,

13:13 making India and showing off its manufacturing prowess.

13:16 Great.

13:17 Well, the first time that we are talking to you, but I look forward to having you more

13:21 often because from where you are sitting, the wisdom that you can give us for our Indian

13:25 audience will be very high.

13:27 So look forward to that.

13:28 But thank you so much for spending the time and talking to us today on the sidelines of

13:31 the WEF.

13:32 Sure.

13:33 Thank you.

13:34 The pleasure was entirely ours.

13:35 Thanks.

13:36 And viewers, thanks for tuning in.

13:36 We'll see you next time.

13:37 Bye.

13:37 (dramatic music)

13:40 (dramatic music)

JP Morgan's Vis Raghavan At Davos WEF 2024 | NDTV Profit

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