Investing in Secular Mega-Trends: Indian Domestic Consumption and the Rising Middle-Class

How to Capture Alpha in India

Most developed markets are experiencing low growth resulting in investors looking for higher growth opportunities in emerging and frontier markets. In the last few decades, investors seeking alpha have sought out Greater China. In the last few years, India’s growth has been accelerating relative to China. Driven by domestic consumption and a rising middle class, the Indian economy is on the verge of experiencing a multi-year growth cycle.

“India's economy is poised to leapfrog from its current seventh-place position to the third-largest economy by 2027 with $6 trillion gross domestic product.” – Morgan Stanley Research Estimates

How to Capture Alpha in India:

In our view, investors who take advantage of the right opportunity set in India such as investing in companies which are direct beneficiaries of the domestic consumption theme will continue to generate good returns irrespective of the risk factors associated with investing in India such as politics, policy decisions, employment, weakening currency, etc.

The Indian consumer is relatively diverse given multiple languages and the number of ethnic subgroups. When this is combined with the infrastructure challenges, it can be difficult to reach the consumer. As such, companies with strong brands and deep penetration will continue to reap benefits of this consumer spending upsurge. Identifying and investing in such companies can help generate substantial alpha on a sustainable basis.

The aspirations of the Indian consumer are similar to consumers in other developed countries, and companies that target these aspirations have the ability to grow earnings strongly over a multi-year period.

Why Invest in India?

A Burgeoning Workforce

• 150 million Indians are expected to join the workforce in the next 10 years and the per capita income is expected to grow 2x by 2027.
• About 60% of the population is under the age of 29 and is about to join the workforce.
• Reasonably educated, skilled and quite enterprising population
• By 2027, 69% of the Indian workforce will consist of Millennials.