Indian Equity Strategy
Indian Equity Strategy

Indian Equity Strategy

 
 
 
Summary

The Morgan Stanley Indian Equity Strategy seeks to deliver long term risk adjusted returns by investing in Indian equities. It integrates top down macro-thematic research with bottom-up analysis to build a growth-oriented portfolio.

 
 
Investment Approach
Philosophy

We believe that an approach integrating macro-thematic research and bottom-up analysis works best in India. Our India portfolio has a growth bias, which we think is a natural outcome of investing in a fast-growing economy like India. We do not compromise on quality of management and corporate governance. Our experience of managing money in India for over two decades has taught us that a fairly concentrated portfolio of 30-40 stocks comprising high conviction names offers the best mix of diversification1 and activeness.

 
Differentiators
A PIONEER IN THE EMERGING MARKETS AND INDIA, LONG INSTITUTIONAL MEMORY

As a pioneer in emerging markets investing, MSIM has demonstrated expertise and commitment to the region. MSIM was an early mover in emerging markets, first investing in the asset class in 1986, originally in emerging Asia. We were one of the first foreign institutional investors in India in 1989, and the first foreign mutual fund in India. We have had a local office since 1993 and have a deep understanding of the local context, which we believe is critical to investing in India. We have long institutional memory of companies and managements and are able to leverage this with a stable team – the members of our investment team have been with the firm for a minimum of 10 years.

INTEGRATED TOP-DOWN, BOTTOM-UP INVESTMENT PROCESS CUSTOMIZED TO WORK IN AN INDIAN CONTEXT

Over the years, we have customized our investment process to work around the specific challenges of investing in India, and we believe this has been critical to our investing success. We follow an approach integrating macro-thematic research as well as bottom-up analysis, with an emphasis on substantial internal research. This helps ensure our portfolio differs from a typical benchmark-driven large-cap portfolio.

CONCENTRATED PORTFOLIO

Our experience of managing money in India for over two decades has taught us that a concentrated portfolio of 30-40 stocks comprising high conviction names could potentially offer the best mix of diversification and activeness. We believe that the most critical element in portfolio construction is appropriate sizing of the position. We believe in taking significant active positions, so that the alpha generated from these is meaningful in an overall portfolio context.

LEVERAGING THE EXPERTISE OF A HIGHLY EXPERIENCED AND STABLE GLOBAL INVESTMENT TEAM

As part of our Global Emerging Markets Equity team, Indian Equity Team contributes to and draws on the strength of our global macroeconomic, thematic and cross-regional fundamental research to help identify opportunities presented by India-specific companies. Our interactions with the global team help us in country and sector comparisons across an increasingly interconnected world. Our best ideas are routinely presented to the global team during our weekly calls or semi-annual roundtable sessions for their perspectives and critical analysis, so that we constantly re-assess our conviction levels.

GOVERNMENT AND INDUSTRY RELATIONSHIPS

Morgan Stanley’s global presence, reputation and extensive resources help the team in their fundamental research and assist the team in establishing long-term relationships with governments and invested companies.

 
 
 
Investment Process

The team follows a disciplined investment process that integrates top-down sector allocation with bottom-up security selection:

Analyzing macro trends is challenging in India, given that data releases come with a lag and are often subject to large revisions. To work around these shortcomings, we have created our own dashboard of high frequency indicators (for example diesel consumption, cement dispatches, power generation and automobile sales) which we believe are far more reliable and timely at picking up inflection points and trends of acceleration or deceleration in sectors compared to headline GDP growth rates or inflation numbers.

After identifying trends from the macro dashboard, the second question is how to pick stocks, particularly when the universe of listed stocks on the Indian exchanges of over 5,0002 names. Over the years, we maintain (and of course constantly review and update) a short list of companies that meets our criteria on parameters such as quality, governance, size, liquidity and track record and that we feel best transmits a sector view. So, once the high frequency dashboard throws up a sector that is at an inflection point, or confirms a trend, we waste little time in making up our mind on which stocks will likely benefit from the sector tailwind. Our long institutional memory, coming from a stable and experienced team, serves us well here.

Indian-Equity-Strategy
 
 
Portfolio Managers  
Ruchir Sharma
Head of Emerging Markets and Chief Global Strategist
26 years industry experience
Amay Hattangadi
Managing Director
22 years industry experience
 
 
 
 

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