India June 2017

Global: Emerging & Frontier Markets | Thematic: Taking a fresh look at India.

Full PDF: Investment Update – Spring 2017

It can pay to invest in Emerging & Frontier Markets

We have investigated the recent performance of Emerging Markets and also assessed how India has faired since we initially commented on our outlook for India back in late 2015.

Domestic (Indian) Policies have driven performance contrary to what many believed

It is no surprise that India has done well. Most frequently, the demographic trend is used to describe the opportunity in India. We are more differentiated than that and suggest that a continuous, strong investment plan is enabling the economy to remain resilient and grow.

Fiscal Prudence in times of uncertainty

The decision to devalue the currency late 2016 hit the markets with a surprise and no doubt, caused stir both within the political elite and consumers in India. However, and on balance, the move was a savvy one to recalibrate the ‘way business is done around India’.

Continuing stock market performance

It may surprise Developed Market investors, but India has seen significant investor interest and investment flows have been strong.

We believe that a pull-back is necessary to give the markets breathing room to absorb the recent rally and find a new equilibrium. The market feels somewhat over-bought at recent levels.

Equity Market Valuation

As per above, we feel that some stocks have had a significant run and we doubt that this can continue without being challenged at some stage. For that reason, we are cautious on general ETF products at this stage as these are ‘trend-following’ by design and miss an active overlay. We would certainly recommend to be more selective at this stage.

Outlook

We continue to favour India over China – and we say this with a 5-7 year horizon in mind. We have allocated to China and India over the years as Principal and Fund Manager investors: we suggest that India has simply more juice left in the tank and has not build its recent economic development entirely on credit which should make it more resilient vs China in the event of a global sell-off.


On Bloomberg - Mapping Global Cues

We are finally in line with the market seeing a fed rate rise coming

Sascha spoke on Bloomberg about the luming Fed rate hike decision, December 2015. Further more we commented on potential mutual fund flows into India’s asset management companies 2016/7. Watch the video on Bloomberg here or see below.


CIO FORECITE - India Asset Management Companies

Most recently, Goldman Sachs announced the sale of its unit to Reliance MF for about $37.5m following Deutsche Bank’s unit sale to Pramerica. In contrast, KKR announced the acquisition of a 70% stake in Avendus, valuing the firm at $175m.

What is driving the exodus of foreign AMCs and does it present an opportunity for foreign investors to buy into the Indian equity market in general or indeed look at acquiring a smaller asset manager? Or, more dramatically, should one shun away completely? What is the opportunity cost of omitting such a large market and economy?

Investment Thesis In Brief

 

We suggest that India does present an interesting opportunity for asset managers, both on the mutual fund and alternative investment side. Despite the regulatory and fiscal challenges, the “I” in BRIC is still moving, although at a slower pace, for now. Exposing one’s portfolio allocation to the vast opportunity India offers, provides investors with a great excess return opportunity with some degree of volatility in the medium term. Those wanting to stand tall in the crowd may want to take a look.

To read the full PDF file including our sector inCITE, Data Analysis and Conclusion, click here.


On Bloomberg

There is uncertainty about the global economy, we worry about a number of markets.

Sascha recently joined Bloomberg to discuss the Fed rate outlook December 2015/2016.