M&G Investments, a prominent global asset management firm, is ramping up its investment in India after a significant market downturn that concluded in February. According to Vikas Pershad, the firm’s Portfolio Manager, this strategic move aligns with M&G’s broader objective to enhance its exposure to India, while also balancing its investments across other Asian markets, particularly in North Asia. The swift recovery of the Indian market has taken many by surprise, given the prevailing uncertainties.

Strategic Shift Towards India

Pershad pointed out that India stands out as one of the most attractive markets in the region. Notably, it was the first to recover from losses incurred due to tariffs implemented by former U.S. President Donald Trump. He characterized India as a "broad and deep market," noting that there are over 1,500 listed companies with market capitalizations exceeding $100 million.

• Domestic Revenue: Over 70% of revenues for the NSE 200 companies are generated domestically, a figure that is on the rise. In contrast, less than 60% of revenues from the S&P 500 come from within the U.S., and that number is declining.
• Investment Focus: M&G is particularly interested in domestic stories that are less influenced by global political climates, seeking opportunities in sectors like music streaming.

Adjusting Sector Allocations

Pershad highlighted a shift in focus towards healthcare services, reallocating some funds from pharmaceutical investments. He also mentioned the growing uncertainty in the automotive and IT sectors. Despite the recent dips in these areas, M&G is cautiously reintroducing exposure to them.

• IT Sector Insights: M&G has maintained a low presence in the IT sector, with the fewest names in its portfolio since pre-COVID times. However, considering the attractive valuations post-recent performance declines, they are gradually easing their underweight stance.

Financial Sector Investments on the Rise

M&G has been actively boosting its investments in the financial sector, particularly focusing on private banks and Non-Banking Financial Companies (NBFCs). While Pershad described microfinance as "tricky," the firm opts for a strategy that minimizes direct exposure in that area.

Optimism Amid Economic Uncertainty

When discussing broader economic trends, Pershad dispelled fears of an economic slowdown affecting India’s market multiples. He remains confident in the country’s long-term earnings growth, even if projections for FY26 show a decrease from 15% to 12%.

• Long-Term View: Pershad believes that the Indian market is well-positioned for long-term equity appreciation and presents excellent opportunities for active managers skilled in relative stock picking.

The IPO Landscape and Gold’s Role

Pershad noted a slowdown in India’s IPO pipeline, indicating that while the equity capital market is facing challenges, M&G is selective with new listings and expects a resurgence in IPOs as market conditions improve.

Additionally, he acknowledged the allure of gold during uncertain times but clarified that M&G does not incorporate gold into its equity portfolios. "I’m not surprised gold prices are rising, and I wouldn’t be surprised if they continue," he remarked, hinting at a personal interest in the commodity while maintaining a clear investment strategy.

In summary, M&G Investments is strategically increasing its stake in India, driven by a favorable domestic market landscape and a focus on sectors less influenced by global volatility. With a careful eye on emerging opportunities, the firm is poised for a fruitful engagement in the Indian market.