SYDNEY — Indian stocks have had a strong year in 2023, posting strong gains reflecting investors’ bullish views. GQG Partners believes the market presents continued opportunities for significant returns.
India is one of the firm’s largest emerging market investments, with about $120.6 billion under management. GQG believes that the country’s infrastructure development and expansion drive will open up more opportunities. China has long been the region’s leader in manufacturing, but India wants to counter that dominance by becoming a destination for companies looking to diversify their supply chains.
According to World Bank data, manufacturing will account for just 13% of India’s gross domestic product in 2022, less than half of China’s economy. Some Western companies, including Apple, have ramped up investment in India in recent days, with authorities trying to convince more executives to set up new factories there as part of a shift known as “China Plus One.” I want to. The strategy aims to reduce supply chain dependence on China by diversifying into other countries.
To attract more foreign companies, India needs to build better infrastructure. However, the ability to spend on improvements is limited by high government debt. Against this backdrop, private investment could play an important role in modernizing the country’s aging infrastructure. GQG portfolio manager Brian Kersman said Indian authorities are already eliminating red tape to make that happen.
“India is opening up at the right time,” Kursman said in an interview. “You’ll get a really high-quality business with long-term stable earnings and cash flow.”
The opportunity is less obvious in China, he said, as the market has matured and growth rates have slowed.
Other investors seem to agree. India’s benchmark Sensex index has risen strongly from its lows in March 2023, setting a new record closing price before year-end, rising 19%. But so far, stocks have fallen back in 2024, wiping out 1.6% of last year’s gains.
No country is more important to GQG’s emerging markets strategy today. India accounts for almost 37% of the investment manager’s emerging market exposure and has more than double its weight in the MSCI Emerging Markets Index. In contrast, GQG’s holdings in China accounted for 6.9% of its exposure at the end of last year.
Indian companies ITC and Adani Enterprises are among the company’s top 10 holdings in emerging markets. Fund managers also own shares in companies operating in sectors such as consumer staples, industrials, utilities, materials, and finance, among others.
India also features prominently in GQG’s other funds. This is his second largest exposure by country in GQG’s international and global strategies, with weights of 16.0% and 9.0% respectively at end-December. China is not in the top 10 for either strategy.
In a research note published last year, GQG explained why it is bullish on India.
“We are increasingly disappointed by recent policies implemented in developed countries, including endless stimulus in both the US and Europe, a regulatory crackdown in China, and even the nationalization of France,” GQG said in a note. ” he said. “In contrast, we think India stands out for its move to become more pro-business.”
Beyond India, Kaasmanck pointed out that there are “more interesting” opportunities in Brazil compared to China.
“We’ve been bullish on this.” [Brazil] “For a little while in the EM space,” he said.
Emerging market financial companies also remain of interest to GQG due to their ability to manage both inflation and rising interest rates.
“They are used to dealing with this kind of environment,” Kaasmank said, adding that lending is strong in India as more people enter the “formal” banking system. Ta.
Email Alice Uribe at [email protected].