Who are the rising stars of India
"The potential of the middle class has not yet been fully exploited"
ChampionsNews: The emerging markets have developed much more slowly in recent years than originally expected. Even so, the British research institute CEBR recently identified India as the fifth strongest economy in the world. What makes India so interesting for investors?
Mehta-Thomas: The stars are favorable for India because we have a very broad young population with a growing middle class. Our problem so far has always been that we have suffered from corruption and socialist economic policies. The current generation of young Indians would like further development, which has led to consumption-driven growth in India. Additional incentives came, among other things, from the introduction of the goods and services tax, which is creating a uniform market in the country for the first time. In addition, India recently put in place a bankruptcy regime that will help creditors buy assets from defaulted borrowers and that will lead to the development of a bond market. These are just some of the political changes from which the Indian capital markets are profiting massively and which are fundamentally changing the future of the country.
ChampionsNews: One of the main arguments for continued growth in India is the emerging middle class in the country. Which key factors are decisive for the catch-up effect of the middle income groups? How will the Indian middle class develop in the next twelve months?
Mehta-Thomas: India has suffered in the past mainly because the potential of the middle class was not fully realized. That is changing today because a development-oriented economic policy has led to significantly more jobs. The new jobs have created an aspiring middle class with higher demands: a house, a car or a vacation trip. For the past 15 years, the availability of financial credit has helped the middle class realize their desires.
ChampionsNews: The portfolio of ACATIS India Value Equities (DE000A141SG1 ) focuses on value stocks. How do you filter out the right stocks for your portfolio? How many stocks do you regularly track for your portfolio?
Mehta-Thomas: Our analysis doesn't focus that much on statistical value parameters. There are many value stocks in the market with low price-earnings or price-to-book ratios. Most of them don't really provide substance, though. Instead, we look for good companies that are run by honest and capable management teams, have only come under temporary pressure or have been overlooked by the market and are therefore mispriced. We have around 100 stocks under constant surveillance, but rarely have more than 20 to 25 stocks in our portfolio because we check the investments very carefully before each purchase.
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