MIKE SELL

By MIKE SELL

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Investment notes from India

Mike Sell, Alquity’s Head of Asian Investments, spent nine days in India for on-the-ground meetings with local companies. He met with 33 company managements in total, as well as undertaking a day of retail store visits in Patna (in the state of Bihar).  The goal was to meet with the majority of our existing holdings and to reassess the outlook for corporate earnings following the second quarter results and recent macroeconomic gyrations.

In addition, we wanted to stress test the sustainability of our holdings’ competitive advantage through meeting with challenger brands particularly in the financial and retail sectors.

 

Concluding thoughts

Our on-the-ground meetings with 33 companies were very fruitful, as they reaffirmed our longstanding view that the domestic economy is in a solid shape. Furthermore, economic activity has not been derailed by spiking oil prices or trade tensions, and thus the structural domestic growth will continue without being adversely impacted in a meaningful manner. Once elections are behind us, idiosyncratic sources for asset price volatility should subside. Any volatility before then will provide opportunities for investors.

Specifically, we believe that there are three key trends that investors are missing: the accelerating growth in the rural economy, rising margins across certain industries, and the re-emergence of the private sector capex cycle.

Overall, we remain extremely positive on India, as the economy is on a firm footing and has the potential to deliver one of the best performances within the EM space over the coming 3-5 years.

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