Diwali gallery: EM and India managers pick their top Indian stocks
Celebrating the festival of lights
While the significance of Diwali varies across India and within different religions, many Hindus associate the festival with Lakshmi, the goddess of wealth and prosperity, to whom they pray for a successful year.
India typically starts the new financial year on Diwali, with Muhurat trading – performed by the National Stock Exchange of India during the evening rather than the usual scheduled trading hours. Stock brokers perform the ‘Lakshmi Puja’ (prayer) at the exchange before Muhurat trading takes place.
Gaurav Narain, manager of the India Capital Growth fund, said: “In 2011 Jyothy Laboratories, a $930m home grown consumer company acquired the failing Indian subsidiary of the German MNC, Henkel. This gave it a diversified consumer product basket of fabric care, mosquito repellents, dish washing and hand soaps, detergents, and deodorants. The acquisition integration has been a success leading to five-year compounded sales growth of 11% and net profit of 30%, and leaving it well positioned to capture the growth in consumer spending in India going forwards.”
Private sector banks
HDFC Bank is India’s largest private sector lender while IndusInd Bank is a ‘new generation’ bank. Co-managers of JPMorgan Indian investment trust, Rukhshad Shroff and Rajendra Nair, said: “These private sector banks are high quality, well-managed businesses positioned for growing profits and market share gains from public sector banks over the long term.”
Gary Greenberg, head of emerging markets at Hermes Investment Management, said: “ICICI Bank in India has done a lot of work restructuring its loan book as well as upper management. This restructuring, its powerful retail franchise, added to a resumption of corporate lending has in our view positioned the business for profitable growth.”
Fashion retailer Arvind
Fashion retailer Arvind is India's largest denim manufacturerand the world’s fourth-largest producer and exporter of denim. Simon Finch, co-manager of the Ashburton Chindia Equity fund which is currently overweight in consumer discretionary companies as it exploits the ‘rise of the Indian consumer’ trend, said: “This company, among others, will benefit from the underlying structural urbanisation shifts and favourable demographics.”
Container Corporation of India
Container Corporation of India is the largest provider of freight containers in India. Gary Greenberg, head of emerging markets at Hermes Investment Management, said: “Container Corp looks well positioned to benefit from the build-out of the Dedicated Freight Corridor Corporation, which is expected to dramatically reduce the travel time of two heavily-congested routes from Delhi to Mumbai and Howrah. Over time, the build-out of logistics parks on land owned by the company should add another leg to the company’s long-term growth.”
UltraTech Cement is a cement company based in Mumbai. Co-managers of JPMorgan Indian investment irust, Rukhshad Shroff and Rajendra Nair, said: “We own the stock in a basket of cement companies positioned for demand recovery, which is showing some early signs, and we expect pricing power and strong operating improvement to follow.”
Motherson Sumi Systems
Car mirror and wiring harness manufacturer Motherson Sumi Systems is currently valued at $3bn. Gaurav Narain, manager of the India Capital Growth fund, said: “If you reversed out of your driveway this morning to get to work there’s a one in four chance you used a rear-view mirror produced by Motherson Sumi. The company counts Audi, Ford, VW, BMW and Hyundai as some of its clients and also builds door panels, bumpers and polymer-modules. Their diversified product portfolio has helped the company deliver compounded sales growth of 17% and net profit growth of 30% over five years.”
As today marks the celebration of Diwali, the Hindu festival of lights, in India and other countries across the world, Investment Week asks emerging markets and India fund managers to name their top Indian stock picks.
Jayna is senior reporter and investment trust correspondent at Investment Week. She joined the publication in August 2015 after graduating with an MA in Multimedia Journalism from the University of Kent.
Jayna holds the NCTJ diploma and has experience in print, online and broadcast journalism. She is responsible for the Investment Week monthly podcast.