India is becoming a popular market for investment due to its booming economy, stable currency, strong stock market and growing working-age population. Franklin Templeton’s Liao Yiping describes the South Asian country as “a fertile place to look for stocks”. “The macro environment in India is much more stable compared to other countries,” the assistant portfolio manager told CNBC Pro on September 12. “If this continues, you may see a lower equity risk premium in the market.” Templeton’s Emerging Markets Equity Asia Strategy team manages $2.9 billion in assets across Templeton Asia Growth Funds and institutional accounts. She likes the “opportunities to identify quality stocks” that the Indian market offers as its breadth improves. An example of this, she said, is the expansion of the MSCI India Index – from 2020 to the third quarter of this year, the index added 50 stocks, more than the 30 stocks in the period from 2010 to 2020. Corporate Performance – Cap Stocks. Morgan Stanley said in a report on September 17 that the South Asian giant recently replaced China as the largest emerging market according to the standards of MSCI IMI, which covers investable large, medium and small stocks. The investment bank added that as of September 16, India’s weight in the index was 2.35%, while China’s was 2.24%. Liao said the depth of the Indian market has also “improved significantly”, with its average daily volume increasing fourfold since 2020. As of September 17, the BSE Sensex index, which represents the 30 largest and most traded companies on the country’s Bombay Stock Exchange, had gained 14.8% so far this year, while the benchmark Nifty 50 index had gained 16.7%. By comparison, the U.S. tech-heavy Nasdaq is up about 19% since the start of the year, while the benchmark S&P 500 is up more than 18%. Liao said she is looking for opportunities in large and mid-cap stocks, and her strategy is to create a “balanced portfolio” of stocks with strong mid- to long-term fundamentals and business models. ‘Exciting opportunities’ Consumption is a theme that brings “a lot of exciting opportunities,” Liao said. On the consumption side, she is paying attention to the wave of premiumization given the growth of India’s middle- and upper-income population. A 2019 report by the World Economic Forum and Bain & Company estimated that about 80% of Indian households will be in the middle-income bracket by 2030, up from about 50% that year. The report added that by 2030, 75% of consumer spending in the United States will be driven by the middle class. At the same time, about 20 million people will join the high-income class. One of the companies Liao is betting on is carmaker Tata Motors. Liao said the company’s SUV Tata Punch is “one of the best-selling models in India so far this year” with a large number of buyers being first-time car buyers. The portfolio manager noted that demand for high-quality vehicles, such as those offered by Tata Motors, is increasing as first-time car buyers “go straight to SUVs instead of the smaller sedans that are usually preferred”. As for the healthcare sector, she lists private players Apollo Hospitals and Max Healthcare Institute as stocks she is watching as demand for quality healthcare grows. In the financial services sector, Liao bets on asset and wealth management company 360 One Wam and HDFC Life Insurance. She described the two companies as “premium service providers” to ultra-high-net-worth individuals and believed they would grow in step with America’s super-rich. Elsewhere in the travel and hospitality industry, portfolio managers like hotel chain Indian Hotels, the company behind high-end brands such as Taj, Vivanta and Ginger. Her optimism comes from its “incredibly strong brand equity and very good operations.” ‘Quality brand’ Another sector that Liao is watching closely is financials as it is “quite reasonably valued in the context of the broader Indian market”. “We think this thesis will hold true in the medium to long term.” She particularly likes “high-quality” private banks such as HDFC Bank, ICICI Bank and Kotak Mahindra Bank. Liao expects these banks to grow as India’s financialization drives and take share from public sector banks. “The valuations of these private banks are reasonable. So I think these large, proven banks have a good position in the portfolio,” she added.
Portfolio managers earmark 9 stocks to profit from India’s growth | Real Time Headlines
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