According to Kunal Desai from GIB Asset Management, investors looking for companies that have the potential to become “the largest companies of the future” should pay attention to India.
The portfolio manager said India's geopolitical positioning is “favorable in the Trump 2.0 era” as investors assess the country's ability to take advantage of a possible trade war between China and the US
President-elect Donald Trump announced he would impose high tariffs on goods from China after taking office. Tariffs on goods imported from China to the US likely to benefit Indiaas companies move production to the South Asian country to avoid tariffs, analysts say.
In an interview with CNBC's Silvia Amaro, Desai described India as “probably one of the most attractive, secular and scalable investment opportunities in the world.”
Apart from geopolitics, Desai cited the country's monetary sovereignty, improved return on equity – a key measure of a company's profitability – and increased private investment as reasons to invest.
Prime Minister Narendra Modi's 'Make in India' initiative was also launched. cited by analysts as a major boon for some Indian manufacturing companies.
For Desai, “one of the most attractive areas is cables, cables and power lines, which are used to develop urbanization and infrastructure projects in India.”
He said that these companies not only see India as a “core market” but also look to expand and start exporting.
“Given the difficulties that Chinese companies have had from an export perspective, many Indian companies are benefiting from customers looking to adopt a dual-source approach to their supply chain,” Desai said.
Good results on stock exchanges in China
Despite investor concerns that Trump will accelerate a hawkish China policy once he returns to office, the portfolio manager said heightened tensions between the U.S. and China – and widely expected GDP growth target for 2025 of around 5% AND fiscal stimulus from Beijing — could “force the hand of Chinese policymakers to essentially revive the spirits of pets.”
Desai said companies with “strong brand power,” competitive advantages and high profitability are most likely to benefit from a potential consumer recovery in the coming years.
“So this creates quite an interesting opportunity for companies whose relative valuations have declined but can now create a rosier outlook for the coming years,” he said, adding that Yum, China may be the main beneficiary.
Yum China is one of the largest fast food restaurants in China Brands Yum an umbrella that includes KFC, Taco Bell and Pizza Hut.
Desai also expects a Chinese e-commerce giant JD.comamong the 10 largest companies in its portfolio to benefit from a possible consumer recovery.
He said that in the next 18 months, among others: “a really powerful dividend, buyback and return of capital story that's happening in China, which we've actually seen in the U.S. over the last four or five years.”