With some 5,500 Indian equities to choose from, investors should instead focus more on which area of the market they want to put their money, and for us the real winners are the mid and small-cap stocks.
In the last 15 years India’s mid-cap companies have delivered 12.8 per cent compound annual growth rate in US Dollars and these returns in periods of both high and low oil prices, good and bad governments, “risk off” and “risk on”.
We fully expect these trends to continue with the only long-term downside risks arising from having no direct exposure, or worst still picking the “wrong” manager to handle one’s exposure.
While share prices may oscillate in the short term, unlike other emerging markets, within the Indian equity landscape, the earnings power of portfolios is not driven by politics.
Furthermore, growth between 2018 and 2040 is going to average 8 per cent plus, which will make it comfortably the fastest growing economy in the world.
With a billion people there is a lot of potential to unlock, regardless of who is in power. The key is to stick to a simple investment philosophy: companies with strong balance sheets, high cash flow generation and quality management.
David Cornell is fund manager of the India Capital Growth Fund