India top pick for emerging market equity managers


Emerging market managers say strong GDP growth and local reforms means they are overweight India, as emerging markets gather momentum.

On Tuesday, the Reserve Bank of India voted to keep interest rates on hold at 6.5 per cent and also held its GDP forecast for the 2016/17 financial year at 7.6 per cent.

Indian specialist asset manager ZyFin says the economic forecast was supported by the good monsoon season and the passage of GST, which was good for business confidence and good for midterm growth and government finances.

Manager of the Nordea 1 Emerging Stars Equity fund Jorry Rask Nøddekær says he expects a “nice cyclical rebound” in India over the next 12 to 18 months.

Gonzalo Pángaro, manager of the T. Rowe Price Global Emerging Markets Equity fund, says he is overweight India “where GDP growth is strong” and consider banks and car manufacturers areas of opportunity.

The fund has a growth tilt, with overweight positions to consumer-related names, financials, and information technology. It is underweight energy, materials, and telecommunication services.

Neuberger Berman Emerging Markets Equity portfolio’s Conrad Saldanha says India is his top country overweight position.

Elsewhere in emerging markets, Nøddekær says commodities and politics raise questions about Brazil, South Africa and Russia. However, he says he is “supportive on China and its transformation from a government-led investment driven economy to a service and urban consumption driven economy”.

Saldanha says he has moved more underweight China due to “better domestic opportunities elsewhere”.

Speaking on emerging markets generally, Pángaro says: “The short-term revival in commodities, oil and currencies has helped, but we are also seeing a lot more examples of self-help within companies, with a focus on cost control, capex efficiency, and improved returns.

“For the first time in five years, productivity has moved above real wage growth in some key markets. This will help lift margins from their lows and improve corporate earnings growth.”