Transcript
As I’m sure you’re aware, it’s been a volatile few days in the Indian stock market post the election. Firstly, there was the exit polls which were very optimistic. And then there was the reality that the BJP had lost a significant number of seats in this election.
Mr. Modi will no doubt be disappointed that he does not have a standalone majority in parliament, but it’s most likely that his NDA [National Democratic Alliance] will form a coalition government and we expect that to be announced any time. Now, this may make it a little harder to introduce some of the tough reforms that we’d hoped for in this in this next term.
Those would be things like agriculture, land reform and so on, but we don’t see any significant change in direction from the government. And India will also be governed by one of the most capable leaders of large economies globally for another five years.
Overall, we still expect India to be the fastest growing large economy in the world for the next decade or so on. And whether that growth rate needs shaved a little bit because of this result, time will tell and we’ll have to wait and see. But the direction of travel, we’re entirely confident, remains intact.
The BJP [Bharativa Janata Party] losses came really in their core heartlands in the north, and particularly among the rural population. So with three other state elections due in the calendar this year, the perception is that Modi will have to adopt a more populist approach.
Whether this is positive in the medium term, we doubt, but with India’s increasingly improving fiscal position, it’s certainly affordable. And in the short term, it will certainly boost consumption and certainly be positive for consumer stocks in India, which is clearly our focus.
With that focus on the consumer, we don’t own any of the perceived Modi stocks, the infrastructure stocks, the government sector PSU’s [Public Sector Undertakings] that have done well in recent weeks and months, so that has been helpful. Our property stocks have suffered in the volatility, I think partly because they have done so well and are also retail favourites. But we are still confident that the property sector and the cycle still looks incredibly strong.
Elsewhere our stocks have performed very steadily in the last few days with more up than down, and particularly strength in the healthcare sector and retail sector.
We are broadly comfortable with Indian valuations and have consistently argued in recent weeks and months against the perceived notion that they are expensive. I think we are really encouraged by the fact that despite the volatility and concerns, the market has actually steadied at remarkably similar levels to where it was before the election was announced.
But as ever, we invest in stocks and not the market, and are very happy to sell stocks that we do feel are expensive. One example would be Avenue Supermarkets, which we sold back in 2021 on valuation concerns. We have recently bought that back at a very similar price to the one we sold it at, but their profits have gone up two and a half times in that period. It remains one of the best plays on one of the fastest growing sectors on the planet, really, which is the growth of organised retail in India, and needless to say, it has had a good week. Thank you.
Disclaimer
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