Investors should embrace opportunities across the technology and pharmaceutical sectors in India, following the outbreak of the Covid-19 pandemic, says Ramesh Mantri, director of investments at White Oak Capital Management, and advisor to the Ashoka Equity Investment Trust (Ashoka).
Speaking to Fundeye, Mr Mantri argued that the increased reliance on technology during the global crisis has catalysed a burgeoning sector in the country’s economy.
Not only was technology crucial for increasingly digitalised activities such as shopping and banking, but the pandemic had also catalysed its importance in educational resources, business communications, health consultancies and e-commerce. This had left India in a very healthy position due to size of India’s population, its incredibly high consumption levels, and the vast depth of its technological manufacturing base.
Prior to the pandemic, India was the second largest manufacturer of smartphones, with Apple, Samsung, Xiaomi and LG increasing the scale of product development in the region. Given the economic slowdown brought about by Covid, the aforementioned global firms have looked to slash costs by outsourcing their research and development to Indian captives, which number well over a thousand and employ around a quarter of the 4.3 million people working in IT Business Process Management sector.
Approximately 47 percent of global captives, specialising in research and development, had been set up in India during the past 12 months, including companies like Microsoft, Google and Amazon. Meanwhile, 78 percent of US hedge funds utilise technical expertise from India.
He explained: “This is an industry that's a global beneficiary of the crisis, and India is very well positioned.”
Mr Mantri also pointed to the prime position India is in when it came to the pharmaceutical industry. Commenting on a macro-level, he noted that 40 percent of generic supplies were made in India, while 30 percent of US FDA approved manufacturing plants were situated in the country. This made it a world leader not just in drug manufacturing, but vaccine production, with the Serum Institute of India partnering AstraZeneca’s Oxford-based vaccine programme.
He concluded: “So it is highly likely that whenever the world finds a Covid vaccine, India is likely to rise.”
Alongside his praise for India’s technological and pharmaceutical infrastructure, he outlined that products and services best suited to changing consumer behaviour across the growing middle classes had to be considered more significantly in portfolios.
Maruti is a manufacturer of small cars and a prominent stock in Ashoka’s portfolio. Mr Mantri explained the attraction of the stock, saying it had a 65 percent share of the small call market, which is ‘booming’. September saw a 30 percent rise in car sales, allowing Maruti to further grow its market share. As the trust holds the stock, ‘you are a beneficiary’ of the spike in cars sales Mr Mantri explained.
Explaining the trend, he added: “Consumers are probably downgrading from large cars to small cars due to costs. Let's say people are planning to buy a large car. Probably they just decided to my small part now. Also because of COVID, some people who were used to using public transport, have chosen to buy a car as it is a lot safer.”
Mr Mantri’s comments follow the release of the Ashoka’s annual report at the end of last month, marking the end of its second year since launch. During a period of high volatility, the trust delivered a sterling net asset value total return of -4.3 percent during the year, outperforming the benchmark MSCI India IMI by 11.7 percent.
