Motilal Oswal is one of the leading investment companies in India managing close to USD 3 billion in listed and unlisted equity assets. It has been advising AfrAsia Capital Management for the last four years. Its Head of Investment Advisory, Ashish Shanker, was in Mauritius last week to share insights into Indian capital markets, their challenges and opportunities.

How would you define Motilal Oswal Group in a nutshell?
Motilal Oswal is an integrated financial services institution with a heritage of over three decades in India. Our investment management business has a track record of close to 14 years and we manage about $ 2.2 billion in listed equities in India.

Our Quality-Growth-Longevity-Price (QGLP) philosophy has evolved from our research papers which we have published over the last couple of decades. Our research focus enables us to differentiate ourselves from other financial services providers and add greater value to our clients. The same is reflected in some of the investments made by the group which has benefited most of our clients in the form of wealth creation.

As a financial services institution promoting investments in India, how do you see business opportunities in this country?
In a world that is low on opportunities and high on capital, we believe India is an attractive destination for this capital searching for high yields. India has emerged as one of the fastest growing economies in the world which has not only sustained global downturn of 2008-09, but is also slated to grow at consistently higher rates during the next few decades. The resilient nature of the Indian economy can be gauged from many leading indicators, such as freight movement at major ports, an increase in hiring, and encouraging data from various key manufacturing segments, namely cement and steel. Besides emerging as an attractive investment destination, it is also being well recognized as a destination for doing business. This appears to be getting reflected in the country’s FDI numbers which have witnessed a substantial surge over the past couple of years. Besides, there are many structural factors which are beneficial to the country. Among others, there is a large and fast growing middle-class resulting in robust domestic consumption. This is much needed in today’s world of rising protectionism. Furthermore, the government is bringing sweeping changes, creating a strong foundation to take the country to the next level of growth. The same will be reflected in growth projections of many global research houses. All of this comes at a time when the world is starving for growth.

To what extent has your philosophy QGLP proved successful to your clients?
With a focus on equity investing, we have created a single investing philosophy that drives our entire equity offering. Over the last 19 years, our Managing Director, Raamdeo Agrawal, has been analyzing the Indian equity market to come up with investing insights in the form of the Annual Motilal Oswal Wealth Creation Study.

The learnings from all these studies have helped us evolve a unique and focused investing process, the QGLP. This process to our mind has enabled us to create significant wealth for our clients. Like our investing philosophy, all our investment strategies have a concentrated and focused portfolio of not more than 20 stocks. Our offerings come with unique features of “low churn” and “focused” portfolios.

The “value strategy”, which was launched 13 years back, is one of the longest running managed strategies in India. It has delivered an annualized returns of 21.5% (in $ terms) since its inception in March 2003 as compared to 13.7% of the benchmark. Similarly, our Next Trillion Dollar Opportunities Portfolio strategy, which is primarily a midcaporiented strategy, delivered 11.3% (in $ terms) annualized returns since December 2007, compared to the benchmark’s 0.6% returns.

How do you assess the performance of ACM India Focus Fund which is managed by AfrAsia Capital Management (ACM)?
We work as an investment adviser with ACM India Focus Fund. Our partnership is always forged with an underlying assumption that we will advise and provide focus using our QGLP philosophy.

Most investors make country allocation decision based on index returns. Whilst that is true for most markets because the fund returns are in line with the respective country’s index, it is not necessarily true for India. For example, the 1-year NIFTY has a return on investment of around 2%, whereas for some of our domestic funds, it’s more than 20%.

What are the important factors that investors need to consider before investing in the Indian market?
In today’s stagnating global growth, there are limited investment opportunities. India is a secular growth story and offers opportunity for significant wealth creation. In order to capitalize this opportunity, high emphasis has to be laid on selecting the right manager with well-defined investment philosophy.

What have been the implications of the recent Indian budgetary measures on the stock market?
This budget has come on the back of looming risks from global markets such as increasing rates and diminished capital flows on account of the Trump policies. It has been a very clinical effort to contain the fiscal deficit, to increase focus on rural, affordable housing and infrastructure spending.

The government is trying to hasten the journey towards increasing the tax to GDP ratio, widen the tax net which will provide more funding for capital spending and allocations to sections of the society which are under-privileged. If tax compliance goes up, it will set the stage for reduced corporate taxes as well.

Our belief is that the focus on infrastructure and housing augurs well for an earnings recovery in investment- related sectors later this year.

Has the recent demonetization process been positive to the economy?
The government’s move to demonetize high denomination currencies can be a positive game changer over the long-term, even though there may be short-term pain. The move is likely to help cut out black economy and enhance productivity within the system, which, to our mind, shall contribute significantly to take the country to the next level of growth. Additionally, it could help to bring informal sector within the regulatory ambit and enhance tax compliance which should enhance the tax-to-GDP ratio and,eventually, result in lower tax rates and higher investment spending.

Is the Indian stock market feeling the effects of the election of the new US President?
One needs to be cognizant of the fact that Indian markets are not insulated from the global world and thus any development globally is likely to have impact on Indian markets as well. From a real economy standpoint, the development is likely to have limited impact on India as the country does not have significant trade relationship with the US. Having said that, we believe that India is likely to be among the first countries to recoup and bounce back.