In medium to longer term, India remains a very attractive market with very attractive companies: Jonathan Schiessl
“Valuation wise the Indian market traditionally has been relatively expensive compared to other emerging markets and there are good reasons for that but where we have been a little bit cautious for a little while,” says Jonathan Schiessl, Deputy CIO, Westminster AMC.
India has managed to be an oasis amidst this global storm and has withstood all the news flow across the globe and as we are nearing an all-time high on the benchmark index the Nifty, where is it that you would be comfortable to allocate fresh money, if at all?
For a lot of global allocators, when they look at various markets around the world, clearly India has put up quite an extraordinary performance and one has to bear in mind what has happened in China and the Chinese indices which have been pretty much the opposite of what we have seen in India.
There have been big declines in China and it has clearly benefited India so far. You know a lot of allocators have kept their Chinese weightings very low but when they look at other emerging markets to put that money to work, India has been a clear beneficiary of that trend. Valuation wise the market traditionally has been relatively expensive compared to other emerging markets and there are good reasons for that but where we have been a little bit cautious for a little while and just on the outperformance of India and on a limited valuations versus other emerging markets.
India is a great story and the Indian companies are very good but from an investment perspective, in the short term, India is looking a bit pricey though it has performed very well. So if China seems to be basing out, then a little bit of money might come out of India in the short term but in the medium to longer term, India still remains a very attractive market with some very attractive companies.
Is the theme that you are looking at includes manufacturing because not only China plus one, but Europe plus one is also expected to ramp up manufacturing in India?
Yes, I think the trend of on-shoring is something which is going to intensify and carry on particularly out of China or in some sectors back into Europe, US etc. Perhaps it is not going to be quite as dramatic as some people are hoping. However, India is a natural alternative market when you look at Asia.
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India is desperately trying to build up its manufacturing capacity and there are attractive subsidies and incentives to come and manufacture in India but of course it is not just about the export story. There is also a very large domestic market in India as well. It is a bit like how China used to be a number of years back. A lot of manufacturers set up factories in China for export but ultimately they are also there to service the domestic market as well. So India looks very attractive from a manufacturing perspective and certainly an area which we have been looking at for some time.
If I had to ask you to pick up the top sector at the moment what is it going to be? Is it financials because that is what everyone is betting on? If yes, which pocket is your pick?
For quite some time, it sounds like a very consensus bet. The Indian financial sector remains probably the key sector in the Indian market. It is a large and diverse sector and there are many different ways of playing this sector – be it in banks, NBFCs, insurance companies etc. It is a big sector from an index perspective.
Also, it is a sector with a very long growth runway ahead of it. I think most investors are getting that sector correct and right now it is probably the most important thing they have to do with a lot of their portfolios. Traditionally, we have tended to focus on the private sector banks.
In the past I have played public sector banks and also the midcap space. There are one or two good midcap names but at the moment we are just focussed on the private sector banks and results coming through have been good and those companies are very well managed and very well positioned going forward to capture more market share and grow very strongly. So just keeping it fairly simple and the large private sector banks still look very attractive to us.
Within financials, now you have an option of so called leveraged and so called only fee based companies as well. Is that something which would excite you – the fee-based ones?
I think clearly getting the fee-based side is interesting and clearly if those companies can get the business model right and get the customer throughput through, people do not mind paying the fee. Those are quite attractive businesses as well but as I highlighted previously, it shows the depth and the spread of options that are available. But yes, I would agree there are some interesting names on the fee-based side as well.
Would you go ahead with capex plays? Would you like capital goods, power name or a pure infrastructure company?
I think defence remains a very interesting segment but it is difficult to play from an Indian perspective as a pure play. They have got businesses in other segments and the defence businesses are hidden. A lot of foreign investors tend to play L&T as such which is obviously the big boy in the sector. It has a lot of interest all over the place and has sorted out its manufacturing side of the business. But it is still doing well abd that is probably how we are playing at the moment in that segment via L&T.
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