Pension Podcast: Institutional investors urged to consider bottom-up approach to India
Across all asset classes, 2018 saw US$47 billion in foreign investment transactions into India, according to Sanjeev Krishan, deals and private equity expert at PwC India, during the Canadian Investment Review’s podcast “Pension Passport.”
And this year could very well surpass that number, he said, with US$21 billion in deals already completed in the first six months of 2019.
Private assets are ripe for allocation by institutional investors, with opportunities to buy at a significant discount, said Krishan, referring specifically to infrastructure, renewables and real estate.
But as with any market, India isn’t without its risks. Driven by the country’s strong consumer base, sectors like technology and health care are no longer especially cheap, said Krishan, noting pension plans looking to invest can consider adjacent sectors for a better deal. “For example they may be investing in e-commerce logistics [rather] than investing in e-commerce itself.”
Deal hunting, or looking for stressed assets, is another area where pension plans might want to be cautious, he said, noting that, in recent years, regulatory roadblocks aimed at turning these assets around have been causing plans to be more careful in considering these types of deals.
However, if investors are looking to invest in Indian public equities, it’s a very open market, said Jinesh Gopani, head of equities at Axis Mutual Fund, a Schroders Investment Management Ltd. joint venture in India, also speaking during the podcast.
The last decade has seen $170 billion in foreign institutional investment in India and there are supportive regulations, he said. “Apart from liquidity challenges below [the] top 100 names, we don’t see any reason why India shouldn’t be a focused destination for [a foreign institutional investor].”
When analyzing what Indian stocks are worth buying, it makes sense for institutional investors to take a bottom-up approach, said Gopani. As well, he noted investors should treat India differently than they’d treat China since there are key distinctions. The Chinese government, for example, is very involved in how businesses run, but India has more entrepreneurs who operate independently of the government. “. . . If your goal is top-down in India, the chances of making money is less compared to what you would have made by investing in a few select stock-specific names who have been growing irrespective of the market conditions and irrespective of the economic conditions.”
He also highlighted that India’s consumption theme is an attractive place for investors to focus. “Basically, the theme of India is more B to C than B to B.”