Investors looking for companies with the potential to become the “blue chip companies of the future” should look to India, according to Kunal Desai of GIB Asset Management.
The portfolio manager said India’s geopolitical positioning is “favorable in this era of Trump 2.0” as investors gauge the country’s ability to take advantage of a possible trade war between China and the US
President-elect Donald Trump has promised to impose high tariffs on goods from China when he takes office. Tariffs on goods imported from China to the US likely to benefit Indiaanalysts say, as companies move production to the South Asian country to avoid tariffs.
Speaking to CNBC’s Silvia Amaro, Desai described India as “probably one of the most attractive, secular and scalable investment opportunities globally.”
Apart from geopolitics, Desai cited the country’s monetary sovereignty, improving return on equity — a key measure of corporate profitability — and increased private investment as reasons for the investment.
Prime Minister Narendra Modi’s “Make in India” initiative is also present analysts state as a great boon for some Indian manufacturing companies.
For Desai, “one of the most attractive areas is cables, power cables and wires, which go into the development of urbanization and infrastructure projects in India.”
He said these companies are not only looking at India as a “major market” but are also looking to expand and start exporting.
“And given the difficulties that Chinese companies have had from an export standpoint, a number of Indian companies are taking advantage as clients look for a two-source approach to their supply chain,” Desai said.
Optimism on Chinese stocks
Despite investor concerns about Trump accelerating his “hawkish China policy” upon his return to office, the portfolio manager said tensions between the U.S. and China have increased — as have the widely expected GDP growth target of around 5% in 2025. and fiscal stimulus from Beijing — could “make China’s policymakers essentially revive the spirits of domestic animals.”
Desai said companies with “great brand strength,” competitive advantages and high profitability are most likely to benefit from a potential consumer recovery in the coming years.
“So this creates quite an interesting opportunity for companies that have experienced a decline in relative value but can now create a rosier outlook for the years ahead,” he said, adding that Yum China could be the main winner.
Yum China is one of the largest Chinese fast food restaurants within Brands Yum umbrella, which includes KFC, Taco Bell and Pizza Hut.
Desai also expects the Chinese e-commerce giant JD.comamong the 10 largest holdings in his portfolio, to take advantage of a possible consumer recovery.
The next 18 months, he said, we will see a “a really strong dividend, buyback, capital return story that’s going to happen in China, and that’s what we’ve actually seen in the U.S. over the last four or five years.”
