A $677 billion manager spots buy opportunity amid sell-off in Indian equities

Aberdeen Standard Investments sees short-term volatility as a chance to build positions in quality Indian companies whose share prices have shrunk.

An electronic ticker displaying sensex at Bombay Stock Exchange (BSE) in Mumbai, India | Photo: Dhiraj Singh | Bloomberg

Mumbai: Unfazed by a stock market sell-off that wiped $34 billion from India’s benchmark equity index and unabating jitters in the nation’s credit market, Aberdeen Standard Investments Ltd. is looking to adding to its India equity holdings.

Short-term volatility is “an opportunity to build positions in quality companies whose share prices have been indiscriminately dragged down,” said Kristy Fong, Asian equity investment director at the asset manager. “We favor those with pricing power, well-placed to ride on India’s long-term consumption trend.”

A tax proposed earlier this month on India’s super-rich, which many overseas investors may struggle to sidestep, triggered the sharpest weekly loss in the benchmark equity index since mid May. Foreign stock investors are on track to make their biggest monthly withdrawal of 2019. The slump in equities further frayed the nerves of investors spooked by a string of yearlong defaults in the nation’s credit markets that started with IL&FS Group in June last year.

“We are still seeing some blow-ups among non-banking financial companies, which highlights liquidity concerns. We think those that are struggling are of mediocre quality and will see a shake-out,” Fong said. Aberdeen manages $676.8 billion as of end-March, globally.

Here are the excerpts from the interview:

• “In the near term, we can expect additional rate cuts to give the economy a lift. Over the long term, the structural positives of a young population and expanding middle class underpin the country’s growth prospects. Improved fiscal reserves ensure the economy is better positioned to withstand external currency and interest rate risks. ”
• “In itself, India is an investment opportunity because its domestic market is so huge, making it less export-dependent than many emerging market peers.”
• “Government spending commitments in areas such as infrastructure, as well as rising affordability from price cuts induced by the Goods and Services Tax, lift the prospects for domestic consumption. This should help to drive company profitability.” –Bloomberg