54-year-old Kenneth Andrade, Founder and CIO of Old Bridge Mutual Fund, believes at a 5-6% growth rate, India will remain one of the top growing countries. Speaking to Business Today, he dwells on India’s position in a post-tariff world. He also speaks about gold as a hedge against uncertainties.
Edited excerpts:
This is a time of extreme volatility and now it seems that the worst of the tariff-related news may have already been priced in by markets. President Trump also seems to be softening vis-à-vis China. Is that the right way to read the current situation?
Well, all of this is still evolving, so we do not know how it would go. It is really a new environment that we are studying.
So, over the course of the next couple of quarters or years, the environment will still be reasonably fluid, and we probably need to take it one quarter or one year at a time.
Both the Indian markets and the economy are slightly better placed than most of the global peers.
You said the macro environment will remain fluid and at times like this discussing valuations and stock prices may not be really material. How reasonable are Indian equities looking?
We seem to be pretty much placed well economically.
I think this 5-6% growth that we are looking at in terms of real GDP growth, if we achieve that, which I think we will, we will still be among the fastest growing economies globally. Two, there were concerns that the market has been unidirectional and there a lot of inconsistencies that had surfaced, both with the primary market and with small caps.
I think that has tempered quite a bit. I think the best situation for us, as investors, is to expect this consolidation to last a little while.
What is likely to happen to foreign institutional investor (FII) inflows—will they find their way back to India?
At 6%, or even a 5% growth, we will be amongst the top growing countries. That should attract its own set of capital. India has got its own set of fans, and global investors have been looking at Indian markets reasonably hard. They’ve just been put off by valuations. Now I think that will change a bit. Global allocations will be in our favour for a while.
I wouldn’t expect disproportionate amount of money to come here. So, you see bits and pieces of that trade of FIIs taking money out and reversing itself.
Do you think India can become a more favoured spot for supply chain relocation?
We are a favoured spot. However, to integrate a supply chain into India in virtually all industries is much to ask for. We are a services economy. There are some industries where we have a competitive edge—like IT services, pharmaceuticals, chemicals, especially the agrochemicals value chain. We are still expensive compared to some of the Asian countries in terms of pricing. I think we are still a couple of years away before all of that comes together. So yes, services and some individual industries will continue to dominate.
Should we avoid the export segment and look more at companies that are domestically oriented?
If I just put the domestic market in perspective, I think the core sector is slowing down. There will be some pockets of deflation, exasperated by the international environment. So, investing in the domestic environment should be tempered.
You have said that investing in globally competitive businesses is the way to go, which are those?
We’ve got reasonable amount of pharmaceutical exposure, that is also in the generics space. We have got IT services, and there are lot of concerns around that. There are some very small businesses and the largest of those are of course automotive. The airlines business in India, for the first time, are looking reasonably profitable.
If someone asked you how to construct a portfolio for the next decade, what would your advice be?
My stance has not really changed from last year. I mean, if you are looking to build a portfolio which has got growth, with companies which are capable, you have to buy businesses which have demonstrated their ability to gain market share globally and put together a franchise globally. I believe that we are in a better state, especially since US elections, now than ever before to take opportunity of the disruptions out there.
What do you sense is likely to happen as far as the overall trade dynamic is concerned?
That’s beyond my domain of expertise. However, we think there will be a logical format on how things will evolve. Equities, however, remain one of the better asset classes to invest in the long term.
And where does gold fit into all of this?
It has done very well till now. I don’t know how much you want to extrapolate from there. At the end, it’s been a brilliant hedge to your portfolio. If currencies are going to be volatile, gold can only be a hedge.
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