InvestNow News – 26th June – India Avenue – Thematic Opportunities Arising in India
COVID-19 has impacted lives, livelihoods, and economic growth in almost every country. India, given its significant and dense population, is deeply impacted as seen by its 500,000 recorded infections and 15,000 deaths. It is likely that economic recovery is likely to be slow and measured as most of the stimulus so far has been directed towards the supply-side rather than demand. Businesses are struggling to cope with where to cut costs to ensure survival and maintain margins i.e. capex related to capacity expansion, operational costs or selling and marketing expenses.
As an active fund manager, it is important to determine which businesses may be less impacted by changes in demand (inelastic to changes in aggregate demand) and supply chain shortages. Equity markets will allocate more capital to either less problematic industries or those with greater visibility on the other side of the COVID-19 valley.
The investment themes present in our fund are considerate of the challenges of managing a portfolio through this environment. We also recognise that typically when interest rates drop in India, it creates a more conducive environment for private investment to take place. Fortunately, this is occurring concurrently with lower oil prices. These factors which should start to benefit the economy once demand starts to respond.
We address five themes which are incorporated within our portfolio today:
- High quality financials
- Communication and internet penetration
- Market leaders winning market share
- Rural wealth rising
- Pharma – India’s comparative advantage industry