In this week’s interview undertaken. y the FundCalibre team, Ajay Tyagi, manager of the UTI India Dynamic Equity fund, focuses on India’s economic growth, market trends, and demographic advantages. He highlights the impact of India’s young, increasingly affluent population on sectors like consumer goods, tech, and financial services. Also discussed is how despite high valuations, India’s steady growth trajectory and quality-focused investment opportunities remain appealing to long-term investors.
Why you should listen to the interview: Discover the compelling reasons to invest in India today, from its “boringly steady” growth to the immense potential in consumer demand. Learn about India’s evolving role in global manufacturing, the political landscape’s impact on stability, and actionable insights on market valuation and sector rotation.
This interview was recorded on 18 October 2024. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview.
Interview highlights:
There’s nothing wrong with boring
“India continues to be very steady in terms of its economic growth. Some people may call it boringly steady. Interestingly, we are at very early stages of our economic growth. And I say that because if you look at our GDP, we would be the fifth largest and about to become the third largest in the next few years. But if you dissect this and look at the per capita income for a typical Indian, it’s $2,500. So we are in very, very early stages of our journey. And I would say that growth should ideally continue for decades to come. If we keep growing at 6%, we would take two decades to reach to the level where other emerging markets are today in terms of their per capita income. I’m talking here about China, Russia, Brazil, even South Africa. So yes, India could remain boringly steady for about a decade or more.”
Beneficiaries of China Plus One
“If you go back all the way to 2016, that’s the time when US started putting up these tariff barriers against China. Now, we all know from common knowledge that China has been the big daddy in terms of you know, being the manufacturing partner to the world, whether it’s the chemicals or the pharmaceutical sector or you know manufacturing electronics or manufacturing auto components. China really has been that one go-to partner. But post 2016, we have seen global resistance towards towards China. It first was noticed during the tariff war, and then later we saw during covid, the massive shutdown that China saw leading to massive problems with the supply chains around the world.
“So therefore, the last two, three years, we have increasingly heard of this term called China Plus One, which means that yes, we would continue outsourcing you know, goods to China, but we also need partners who can add as a backup to China. And I think different emerging markets have strengths in different sectors.
“India does have strength in pharmaceuticals, chemicals and also electronics. And it is from this perspective that we have seen a lot of chemical companies in India actually getting business from the global giants. And they are now becoming outsourcing partners to a lot of these big global chemical giants. So it is with this perspective that we’ve been looking at opportunities, we are looking at companies particularly, which have a very strong advantage and our research has thrown up a few opportunities, and that’s where we are positioned.”
An attractive entry point for investors
“Investors should definitely take a longer term view on India. What I’m extremely confident in stating is the very sure and steady nature of India’s growth. And there are many factors behind this. We just talked about demographics. We just talked about how the government is wanting to step on the reforms continuously, whether it’s one party or the other. We also spoke about the educated population. So there are multiple factors which will keep India in good stead in terms of its economic growth over the coming decade.
“But look, stock markets are always volatile. The stock market at certain times get ahead of themselves, at certain times become too anxious about things. At this stage, it’s our reading that the markets are slightly ahead of themselves. So we won’t be surprised if the next year would be a weak year for the markets possibly sideways, maybe a slight negative drift.
“But remember these are also times when you actually start building your position into a country like India. So rather than timing the market, I would urge our investors to make staggered investments into India over the next 12 months. Possibly this would be one of the better times to actually invest into India and then hold on for the long term.”
Conclusion: India offers long-term opportunities for investors seeking steady returns without the usual volatility. As the world looks beyond traditional markets, India stands out as an essential addition to a diversified investment portfolio. Ajay Tyagi provides insights into India’s promising sectors and shares a prudent approach for navigating short-term market fluctuations.
