Thoughts on a plane to India

The next ten days I will be in India, with visits to Delhi and Mumbai.

At the Jefferies and JP Morgan conferences, I am due to meet some of Indias most prominent and succesful business leaders.

I have got 30 meetings lined up including dinner with the founder and owner of Zomato, senior management of the Birla business group and JSW Steel and Energy.

I will also meet management from Indias leading private banks, Icici Bank, Hdfc Bank and Axis Bank.

Our fund has investments in forty of the best managed corporates in India, many of whome I will revisit on this trip to get an update on progress.

The Indian economy and stockmarket is on a roll this year. The market is to a large extent driven by a domestic investment boom. Monthly retail flows into mutual equity funds so far this year amounts to USD 8 billion, compared to 2,4 billion last year.

The economy is growing at above 7 percent, corporate earnings are growing in a range of 15-20%, some companies even more. Fed is expected to cut rates next week for the first time in this cycle. The dollar is showing signs of weakness and investors are concerned that the US economy might fall into a recession. Lower interest rates will improve risk appetite for investments in emerging markets including India. A weaker dollar is supportive for Asia and will give increased capital flows to India. At the same time the Chinese economy is developing in the wrong direction. The crises in the property sector and the credit losses for the chinese banking sector that will follow will take a decade to sort out, if there is political to do so.

As a result of trade war and sanctions between USA and China, foreign direct investments to China is drying up with several global companies closing shop and leaving. India on the other hand is receiving increasing levels of foreign investments with many multinational companies setting up production for export. Samsung Electronics, Apple (Foxconn Technology), Huyndai and Kia Motors to mention a few.

Zomato is a successful appbased company for recommending and ordering food from restaurants. They also sell groceries online with homedelivery within 10 minutes. The company is expected to turn profitable this year.

The Birla Group has investments in cement, aluminium smelting, telecommunication and paintbusiness.

JSW Energy is a privat, previously coalbased, powercompany with an ambitious plan to help Mr. Modi deliver Indias ”Green transition” through large scale investments in renewable power and facilities for storage of power.

I will be back with reports from India after my visit.

/ Gunnar Påhlson, 24-09-14