Interest in India has been rising steadily among investors, thanks to its growing economy , strong stock market performance and burgeoning population . Amid some talk of an Indian stock market bubble , however, Pramod Gubbi, co-founder of Marcellus Investment Managers, revealed how he is playing the market. The veteran investor said he is focused on a “bottom-up” strategy, selecting companies with trustworthy, high-quality management teams that are adept in doing business and allocating capital “Management teams know better than anyone else how factors like technological developments affect their business. So, our job is to evaluate whether the management teams are hungry enough to identify changes that are happening and adapt to them,” he told CNBC Pro last week. The BSE Sensex index â which represents 30 of the country’s largest and most traded firms on the Bombay Stock Exchange â is up around 12.8% year-to-date as of Sept. 9, while the benchmark Nifty 50 index is around 14.7% higher. For comparison, the U.S.’ tech-heavy Nasdaq Composite is up around 13% since the start of the year, while the benchmark S & P 500 index is around 14% higher. Gubbi says he also looks at a company’s medium to long-term growth trajectory as well as the performance of its sector before investing in a stock. “Basically, we like well-run Indian companies that are very well governed with good capital allocation across sectors,” he added. Women-led themes One theme that Gubbi is interested in is how India’s growing numbers of working women are spending their money. Tata Group-owned fashion accessories and jewelry Titan is one such beneficiary, according to the investment manager. Brands under its belt include Tanishq, a jewelry label known for its gold and diamond pieces. Calling it a “national champion,” Gubbi says the company is benefitting from a “consolidation wave” in the industry as consumers seek out established brands, rather than smaller mom-and-pop jewelers that historically dominated the market. Tanishq’s “management spotted the trend that working women wanted these elegant pieces and were moving away from heavy jewelry. And they have been doing a good job serving this niche,” the investor added. Nestle India â the brand behind consumer favorites like Maggi, Nescafe, KitKat and Lactogen (formula milk) â is also appealing to India’s women consumers, Gubbi said. The company is a “market leader,” especially in milk and coffee powder, he added, and has been gaining traction, especially among women with disposable income to spend on its higher-end products. Also reaping the benefits of this theme is Asian Paints , Gubbi noted. The paint manufacturer is seeing strong demand for its recently launched interior decorating segment as working women, as well as India’s rising middle-class, invest in their homes, he said. Other stocks Other Indian companies Gubbi likes include Divi’s Laboratories and HDFC Bank . Divi’s is among the largest manufacturers of active pharmaceutical ingredients and counts global titans Novartis , GSK and Merck among its clients. The company is set to gain from the “China Plus One” strategy as pharma companies increasingly source from India, Gubbi explained. This strategy sees firms reduce their dependence on China by diversifying supply chains and operations to other countries. As for HDFC Bank, Gubbi said it looks “very attractive from a valuation standpoint.” “We have a large position on it and with private sector banks underperforming in the last two months, we see it has turnaround potential,” he added.
Source Agencies
