India Equity: High-Growth Opportunities in a Complex Market


2019/04/15 13:40

If India continues to grow as fast as it has in the past two decades, the India of 2029 and 2039 will be vastly different from today as a number of megatrends shape its future. Urbanization is keeping pace – approximately 30 people are moving to cities from rural areas every minute.1 Investments in infrastructure are accelerating, helping boost industrial growth. Meanwhile, high-value exports such as pharmaceuticals and engineering goods (on top of its strong technology services exports reflect India’s global economic clout.

如果印度继续像过去二十年那样快速增长,那么2029年和2039年的印度将与今天大不相同,因为一些大趋势塑造了它的未来。城市化正在跟上步伐 - 每分钟约有30人从农村地区迁移到城市。基础设施投资正在加速,有助于推动工业增长。与此同时,药品和工程产品等高价值出口(除了强大的技术服务出口外,还反映了印度的全球经济影响力)。

While India’s long-term economic outlook appears bright, investors can’t underestimate its idiosyncrasies, which can affect the prospects of individual companies. For instance, as one of world’s largest energy users and a net oil importer, India is prone to the risk of a twin (fiscal and current account) deficit from higher oil prices. While the country has favorable demographics, skilled workers are in short supply and wage inflation is high. While the government is putting more money into infrastructure, existing transport and energy systems are still largely insufficient to cope with current demand. In addition, land is in high demand and can be difficult to acquire.


India Is Investing More in Infrastructure


Source: Citi Research, Various Government Reports as of 1 February 2018. 


Given this contrast, we believe vigilance and patience will be essential to creating wealth from investing in India. That’s why our approach is to carefully select companies that can see opportunities in the shifting landscape and navigate their way through India’s transformation.


A smarter alternative to index investing


Investors in India tend to find comfort in the index, assuming that where India’s GDP growth goes, so goes the index. That hasn’t always been the case, partly because of the structure of the Indian economy, where there’s a large informal sector and many unlisted enterprises. In other words, the index can be a poor proxy for overall economic activity.


We believe that a better way to capture growth opportunities in India is by methodically constructing a portfolio without regard to the index. From a universe of approximately 7,000 listed companies2, our India Equity Strategy builds a portfolio of 30-40 stocks. Each stock portfolio passes through rigorous research and analysis focused on three fundamental areas: the strength of the company’s business model, the quality of management, and valuation. That is, we find strong businesses that are resilient through the economic cycle, we ensure they have capable management teams that can be trusted with capital, and finally, we invest if the prices are justifiable. This time-tested stock selection process is designed to mitigate permanent loss of capital for our investors.


A deep understanding of a company is key. Last year alone, our on-the-ground team3 traveled 80,000 kilometers across India to research and visit companies and meet management. The team4 tracks over 20 proprietary databases and leverages a variety of sources as well as the insights of the global PineBridge investment team.


Opportunities across the market spectrum


Our high-conviction approach results in a portfolio that’s starkly different by sector breakdown from one that replicates the benchmark (MSCI India Daily Total Return Net Index), yet is diversified.


We have found opportunities across the market spectrum – fast-growing companies that hone their digital, technological, and intellectual property advantages to expand market share, companies that stand to benefit from structural drivers such as consumption and infrastructure, and those making a turnaround.

我们在整个市场范围内找到了机会 - 快速增长的公司,他们拥有数字化、技术和知识产权优势,以扩大市场份额,受益于消费和基础设施等结构性驱动因素的公司,以及那些扭转局面的公司。

India’s transformation is likely to be accompanied by disruptions, in the form of newer business models, new regulations, and other changes. This calls for a smart playbook – investors need to look for companies able to navigate through various cycles to maximize the opportunity, while minimizing risk. The 13-year track record of our India Equity Strategy shows that the market is rich in alpha – for those who know what to look for and how to look for it.

印度的转型可能伴随着新的商业模式,新规则和其他变化等形式的破坏。这需要一个智能手册 - 投资者需要寻找能够在不同周期中进行导航以最大化机会的公司,同时将风险降至最低。我们印度股票策略的13年历史记录显示,市场上富含阿尔法 - 对于那些知道要寻找什么以及如何寻找它的人来说。

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