Mihir Vora, who oversees the $169-million Excel India, expects Indian equities to be an attractive place to invest over the next several years.
"Valuations are below long-term averages, with Indian equities trading at the low end of their historical range," says the Mumbai-based Vora, the chief investment officer, offshore investments at Birla Sun Life Asset Management Co. Ltd. (BSLAMC).
Though Vora says global economic growth is likely to remain in a "muddle-through zone, with a fragile recovery in the U.S. and Europe," he believes investor fears are already reflected in the prices of Indian stocks.
"India is expected to have earnings growth this year of almost 15%," says Vora, "while higher-priced U.S. markets are expected to grow earnings of only single digits. Indian equities are very attractively valued for investors with a three-to-five-year horizon."
India is a fast-growing economy with a very young population and a middle class that's continually expanding, says Vora. "So that story has not changed."
Vora cites five key factors that will drive investment opportunities in the country: 1) inflation and interest rates are cooling down, 2) the current-account deficit and the value of the rupee have stabilized, 3) rising exports may be "green shoots" in the export sector, 4) the investment cycle is expected to pick up, and 5) record rainfall has been extremely good for the agriculture sector.
Other positives that Vora cites include improving GDP growth, stronger corporate earnings and earnings margins, and ongoing reform movements.
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Indian equity markets are vulnerable to global capital flows and, according to Vora, there have been consistent foreign flows into the country for the last 15 years. And that growth, both from local and global investors, is expected to continue in 2014.
In selecting stocks for Excel India, Vora and his colleagues favour high-quality, globally competitive companies with sustainable growth prospects. Their strategy emphasizes companies with sound fundamentals and visionary executive teams.
Along with disciplined qualitative and quantitative analysis, Birla personnel visit companies and meet with suppliers, customers and competitors.
The Birla team currently holds approximately 29% of the 55-name portfolio in financial-services companies, 9% in consumer products and 7% in industrials. "We expect a recovery in the cyclicals to gain pace over the rest of the year," says Vora, "so we are positioned for that."
In terms of market capitalization, approximately 12% to 14% of the overall portfolio consists of mid-cap stocks. Vora expects this segment to outperform the broader market.
Vora earned a bachelor of mechanical engineering degree and an MBA from the Indian Institute of Management in Lucknow. He also holds the CFA designation. At the beginning of his career, he worked as a fund manager at SBI Funds Management and ICICI Prudential Asset Management.
He was then responsible for setting up and heading the equity team for ABN AMRO Asset Management, India, and launched six equity portfolios. From July 2006 to February 2009, he was the head of equity management in India for HSBC Asset Management. Before joining BSLAMC in January 2012, Vora was the head of the India region for Abu Dhabi Investment Authority in the internal equities team.
Vora works closely with portfolio manager Atul Penkar, head of offshore equities, who has led Excel India since August 2011. BSLAMC currently manages more than US$13.3 billion in mutual fund assets, and an additional US$1.1 billion in offshore equity and fixed-income funds.
Investors in Excel India, the oldest and largest of its kind in Canada, have had their patience tested over the past several years. Through the end of December, the fund has sustained a three-year annualized loss of 9%.
However, over the long term the fund has significantly outperformed its market benchmark. Since its inception in April 1998, the fund has a 9.1% annualized return, compared to the BSE Sensex return of 6.05%, as of Jan. 31. "There is a really strong case for active management in India, by picking the right stocks and sectors," Vora says.
