India’s growth has continued despite political changes., says Sands Capital’s senior portfolio manager
Apr 11, 2019, 07.55 AM IST
India’s growth story is bigger than politics although the base case is that the BJP will come back to power post
elections, said Neil Kansari, senior portfolio manager at Sands Capital Management. In an interview with Sanam Mirchandani on the sidelines of the Motilal Oswal Ideation conference, US-based Kansari talked about opportunities in the tech and internet space and why he prefers sticking to the top companies in the NBFC space.
There have been fears of a recession in the US and global growth slowdown which has impacted sentiment in global markets recently. What is your assessment?
With recent data coming from Germany and US, bond markets are suggesting rising fears of a growth slowdown. The Fed has also gone off the tightening cycle. So all these factors are making markets fear a global economic slowdown. The long term story for India remains very strong. We remain very optimistically biased towards India in all our global funds and the emerging markets fund. We are significantly overweight relative to the benchmark. India is one of those isolated countries where global growth matters but on a relative basis it is much more a domestic economy. While India is not immune to global stock market volatility, the ability for the Indian economy to do reasonably well even in a weaker global outlook is better than countries which are export driven in our view. India is a consumption driven economy primarily. The demographic trends are not going to change. India on a relative sense it is still reasonably well positioned at least from an emerging markets (EM) perspective even if there is a bit of a slowdown in global markets.
Is the market overheated after the recent rally?
We feel reasonably good. Our base case is that the BJP does come to power. While there can be some periods of volatility, India’s growth has continued despite political changes. Even in the worst case it is still all right, but we think the base case is most likely the BJP comes and there is continuation of policy which will be good. We have been relatively overweight positioned. India has stable to favourable macro economic conditions in the EM world. We are prepared for volatility if there is one but we believe that the growth story of India is truly bigger than politics.
If there is a stable government post election will you look at increasing weightage on India?
Politics is within the environment of a stable to favourable view. That’s already captured in our overweight. We find India to be stable to favourable. Our weight continues to reflect that. It is probably not going to change even in the worst case where there is a coalition government.
Globally you are bullish on tech and internet names. Which are the companies you are bullish on within that space in India?
Indian tech has been mostly outsourcing software companies and we have never really found those too attractive. We have found it difficult to find a business especially in the in the more recent past. In China we have large investments in leading Chinese internet companies and in the US we are big owners of lot of leading internet and technology companies. Those are mostly in many ways domestic stories where they are participating in the way the consumers are changing. Somebody spending time away from traditional media to streaming video, that creates a whole new segment if you can find the right business. People’s shopping habits are changing whether it is China or US. You are seeing that in India as well. Those are the kind of things that are so secular. Unfortunately in India lot of those kinds of things are mostly still private. It is also because only in the last four five years it has gone from small number of internet users to very large number of internet users. For any of these businesses to scale, it would take five or seven plus years. It is really a matter of time that larger platform type of companies within India will go public.
Is the worst over for the NBFC space?
We have been investors in the NBFC space but we have just stuck to the bluest of the blue chip names there. We think this shakeout is probably good for them long term as they have got strong balance sheet, low cost funding, great management teams and great reputation. In this new environment where most of your competitors are much weaker, the opportunity is more or less still the same in terms of the growth opportunity but suddenly your competitive pool has shrunk and they are struggling to get capital at a fair cost and their balance sheets are stressed so they are dialling back their growth. Some of them are in losses. They have got credibility issues around management and governance. We feel sticking to the highest quality companies which have the balance sheet strength to begin with has served us really well and in this new environment, their competitive moat has become stronger than even before. We feel very good about those opportunities.
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