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Opportunities in Indian midcaps
Matthias Knab reports from the „Indian Hedge Funds 2006“, organised by Jefin Events, in Geneva:
Ruchit Puri, CFA, Kotak Mahindra (UK) Ltd. Currently India’s GDP is $735.6 bln, representing just 1.7% of world’s GDP. However, India displays the most rapid growth within the “BRIC” family (Brazil, Russia, India, China). By 2050, India will have the largest working population and will have developed from an agrarian to a service industry. Already by 2010, the number of middleclass consumer households will reach 90m and 124m in 2012.
Puri also mentioned concerns or risks that could impact the growth story, such as current account deficits (from higher oil and non-oil imports), fiscal deficits, high government debt and political risks.
When it comes to investing in India, three macro themes stand out: Consumer spend plays, infrastructure and outsourcing.
Looking at the consumer profiles, India boasts a young population; possible plays may include mobile phone, retail banking, clothing, hospitality, media and automobile industry. Infrastructure plays include airports, highways (15,000 KM under construction), energy
utilities and raw materials. Outsourcing can be called “wage arbitrage” (lower cost structure in India) and is frequent in technology, pharma, auto and textiles industry.
Puri recommends to follow a bottom up midcap approach with a medium term perspective.
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