Ajay Tyagi, manager of the UTI India Dynamic Equity fund, takes a deep dive into the changing dynamics of the Indian economy and equity market. He discusses how India’s growing middle class is driving consumption, which sectors offer long-term potential, and how global trade tensions are influencing market positioning. He also covers the outlook for small and mid-cap stocks and what rising per-capita income means for future growth.
Why you should listen to the interview: India’s economic story is one of transformation – rising incomes, evolving consumer habits, and increasing global relevance. Our guest this week explores where the opportunities lie, what risks to watch, and how investors can navigate the current market environment. Whether it’s valuations, trade policies, or sector-specific growth, these insights will help shape your investment thinking going forward.
This interview was recorded on 23 April 2025. Please note, answers are edited and condensed for clarity. To gain a fuller understanding and clearer context, please listen to the full interview – see below.
Interview highlights:
The outlook for the Indian middle class
“When we look at the data, we look in terms of let’s say increase in per capita income. That’s the surest way of trying to figure out whether wages are increasing or not. If you look at the progress of per capita income, then you’ll be very reassured about the fact that this particular vector has shown the highest growth amongst all other emerging markets. And obviously an increasing per capita income is a reflection of increasing wages and therefore increasing disposable income eventually.”
Targeting low penetration sectors
“Let me talk about the food services industry — quick service restaurants, casual dining restaurants, hotel and hospitality industry — these are discretionary items, so to speak. India for the longest time was less than $1,000 per capita income. Just put that in context of where UK is today, and you’ll imagine what I’m talking about. When you are on an average only earning $1,000 per capita, you are basically only spending towards the basics and the essentials and the staples items. You’re not making what is called as discretionary expenditure. Today we’re talking about an economy which has already moved to $2,500, and therefore, the ability of households to spend on discretionary items is increasing.
“Just to give an example, when I was growing up and I was in college in the nineties, a typical family in a large city in India would go out eating with their family possibly once in three months. That frequency has already now come down to maybe a couple of times in a month. So as yet the penetration is very low, because a typical family in the UK may be eating out a couple of times in a week. So these are industries which give us that comfort that there is a long, long road and a long runway ahead of us for growth to happen.”
The benefits of being local
“Being a local asset manager and being the oldest asset manager in the country, we have an extremely strong team of analysts and associates, which help us in terms of going out there, scrubbing the universe, trying to figure out which are those new companies or the smaller companies which are worthy of tracking. And therefore there’s something called a new idea generation.
“It’s great to actually go deep into the existing companies within our universe, but also to spend time in terms of discovering new ideas. And with a very strong 16 member analyst team, I think we are one of the most capable out there in terms of hunting for these newer ideas in smaller companies. But we also know that the mortality in these smaller companies is very high. So we don’t get overly excited. We do a good job in terms of trying to have a deep and hard look at most of these companies. But the ratio of companies that make the cut and finally land up in the universe is not more than 20%. So yeah, we have to scan all a hundred percent. What makes the cartage just about 20%.”
Conclusion: Want to understand why India’s domestic story is so compelling for investors? This episode explains the growth trajectory of key sectors and offers clarity on how global trends like tariffs and trade deals intersect with local consumption.
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