Do you want to take about consumption as a seller? Today, India’s overall demographics are quite strong and rural recovery is also what people are talking about. How do you play the whole theme of consumption in India that you believe in?
Jonathan Schiessl: It’s clearly a great opportunity in the entire consumption space. I think it’s quite interesting that there are different ways you can play with the theme of consumption. Nothing too new for me here. I mean, finance is a big way to play increased consumption. Obviously, as you point out, some real FMCG companies themselves have other ways to play. There are different ways to play.
I think broadly, the market offers a lot from a consumption perspective. So, it’s a diverse sector and it’s a fun place to be and it’s been around for a while.
Want to know about FMCG, because since COVID till now we have only seen urban India that is very happy with consumption and now in rural areas it seems to be coming back. Tactically, you would think that this is a good investment and can you see meaningful recovery in rural spending in FMCG?
Jonathan Schiessl: Yes, you are absolutely right. I think many analysts have been waiting for this rural spend to take for some time. And clearly, as you say, it seems to be coming now. It seems pretty sustainable to me. Obviously, swings between the city and the countryside on a short-term basis from a consumption perspective. But overall, I think, consumption still remains a cornerstone of India’s story and generally continues to look good for us.
Financial savings is a big theme that has been used in India and is expected to grow rapidly. Are you thinking of investing part of your portfolio into this additional financial market?
Jonathan Schiessl: Absolutely. I mean, clearly, this is a trend in a long way, as you said and there are different ways you can invest in some of these non-bank financials, which play directly or even clearly some banks. will also clearly benefit from the trend. But it is definitely a trend that I think should be followed and definitely one that India has been offering for some time and will continue to offer for some time in the future. In the theme of the entire energy transition, because many in the market believe that this will be a multi-decadal opportunity and given the large supply chain and the variety of energy mediums that are seen, in contrast to traditional fossil fuels, this can really throw up a sizable opportunity for investment also. What do you think?
Jonathan Schiessl: Indeed, this is a big, big transition that will take decades. I think the problem, obviously, is funding and technology. Of course, in some markets elsewhere in Europe and the US, there is some pushback about the whole move because of the high cost and obviously still a lot of the technology.
Yes, some of these technologies are definitely getting more efficient and better, but all the infrastructure that needs to be set up will take some time to play out as well. I think it’s an interesting sector. The move globally is something you will never get back, but it takes time and yes, time and money.
And then, which themes would you recommend not getting a profit book right now because a lot of the segments are done and maybe there’s some churn, which is where you think is the top?
Jonathan Schiessl: That is difficult. Certainly, if you look at the Indian market vis-à-vis other emerging markets, it has done well. Many domestic retail savings have entered the equity market, chasing IPOs, and holding higher.
I think India, just in the short term, there is a risk that it can be sold. I’m not saying a major reversal, but some of the hottest sectors, especially in the midcap space and below, should probably just let off a bit of steam.
As we look at it, the financial area still looks good to us. The banks still look good to us. Global IT, IT sector looks okay. I’m trending there very healthy. So, broadly speaking, the broader market may need to underperform, but overall, we are still bullish on India in the medium and longer term view.
What about autos as a theme, do you think it’s peaked and all this EV noise and the kind of policy changes that are happening make it difficult? What is your investment theme around cars?
Jonathan Schiessl: Well, this place, the whole EV discussion is obviously complicated. Especially in a market like India where some of the roads in the major cities are obviously very congested and the infrastructure still needs to be rolled out, certainly on the EV side, I think the trend is clearly moving towards that. but it may not be as fast as expected so you will have other problems, yes battery costs have come down a lot but it will be interesting to see if more traditional local suppliers in India can step up. to this place.
So, it’s a fun place to be. Maybe the growth expectations are a bit high at this point and if you look at some other markets, plug-in hybrids seem to be the solution in the short term.
