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Consider three major global equity markets: China, India, and the US. Of the three, would you believe India has been the second-best performer over the past 30 years, well ahead of China? It’s true.
Figure 1 shows the cumulative total returns posted by the S&P 500 Index, the MSCI China Index, and the MSCI India Index from 31 December 1992 through 30 April 2022. Our clients have been uniformly surprised that China’s long-term performance has been so much lower than that of the US and India, especially given all the investor focus on China in recent years. And they’ve been even more surprised that India – a market many clients have more or less ignored – has fared so well over the long run.
As we commented recently: “In China, everything is because of the government; in India, everything is despite the government.”
While China has provided ample support to industry development over the decades, including putting in place world-class infrastructure for transport and distribution and offering material subsidies, this has not been the case in India. In effect, the cost of capital has been far higher in India than in China, while competition among industry players has been lower. In turn, we believe this has led to a ”survival of the fittest” outcome across the Indian equity market, with many companies that generate sustainably higher returns on capital emerging as “winners.” These high levels of return on capital have, to a large degree, driven the strong performance of the Indian market over time.
Of course, past results are no guarantee of future results. Having performed so strongly in recent years, it’s possible that India’s equity market may take a breather for a period. That being said, India is an often-overlooked performance story that we believe may still have further to go. Looking across the market today, we continue to see a range of bottom-up investment opportunities in companies that we think have the ability to compound capital for years to come.
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Equity Portfolio Manager Yolanda Courtines explores why company engagement is a key component of successful stewardship investing.
Thematic investing focus: The transportation revolution has arrived
New technology and environmental concerns are creating a disruptive force in the transportation sector, leading to supply-chain investments and a host of new addressable markets.
Recession risks and markets: Can we avoid a COVID hangover?
Current earnings forecasts and asset prices suggest overly optimistic expectations for the global economy and markets in 2023, according to Equity Portfolio Manager Dan Pozen.
Fintech market overview: The intersection of disruption and dispersion
In the latest episode of WellSaid, Portfolio Manager Matt Lipton and Global Industry Analyst Matt Ross join host Thomas Mucha to discuss their outlook for fintech in today's environment, exploring the recent pullback in the sector, disruptive fintech innovations, potential regulation, and much more.
By design and by default: Industry consolidation gathers steam across India
Equity Portfolio Manager Murali Srikantaiai sees increased industry consolidation in India as a largely positive trend from which some equity investors can (and should) seek to benefit.
Thematic investing: Long-term thinking for a short-term world
With economic conditions expected to remain volatile in the coming year, members of our Investment Strategy team suggest that thematic allocations may help reduce the importance of the cycle to portfolio returns.
The allocator’s landscape: Three areas of attention for 2023
Natasha Brook-Walters, Co-Head of Investment Strategy, discusses downside mitigation given the shifting equity/bond correlation, the impact of cyclical and macro volatility, and opportunities to position for long-term change.
EM equity in 2023: Will the longest bear market in history continue?
We explore three key considerations for EM investors in today’s challenging environment and highlight potential winners and losers in 2023.
Equity allocation ideas after a year of factor extremes
Members of our Fundamental Factor Team discuss the role of defensive allocations as a complement to growth and value, the improved stock-picking environment, and the need for macro stress tests, among other topics.