Schiessl further says that in autos they have some exposure with Maruti, but they are quite selective about it. Tata Motors has continued to have problems with Jaguar Land Rover and is sidelining Skisl in that sector.
What would you do about the real estate market in India if you were tracking it? The upper end of the market was doing very well, but at some point, the cycle was expected to turn. Do you see that happening now or is it still some way off?
Jonathan Shissel: Yes, if I’m honest that’s a part of the Indian markets, which we don’t work on to a great extent. We’ve seen some high-end developers before, but obviously real estate of all industries is very local. It is difficult to put a comprehensive view on the entire space. But that said, clearly some companies in certain pockets have done better recently. Clearly, the underlying economy is humming along nicely and certain companies are doing well in certain areas but that is not much of a focus.
What is your understanding of the overall real estate market here in India? It’s coming off nearly a decade of underperformance, a pretty long spree. But where next? Do you believe that stocks are priced to perfection, at least in the near term?
Jonathan Shissel: Yes, I think you might be right. Clearly, a lot of money has gone into real estate stocks, especially good quality stocks. But, the overall structural story for real estate in India is one of a country in dire need of more building, especially low-income units. But apparently, that’s not necessarily where developers are focused. So, it is a very strong structural story.
But from a stock market perspective, there is a question of whether the companies in play are playing in the bigger picture or whether they are playing in more regional and local pockets of wealth, etc. So, you should be careful looking at stocks, land banks and everything else. So, it is an interesting play. But as I said earlier, we don’t tend to get too involved with that.
How do you position yourself for the consumer sector in India?
Jonathan Shissel: Just talking about autos, we have some exposure to Maruti. But obviously, on the domestic side, the rural side, it was a little bit harder for that sector. But even on the big picture side, there are some major structural changes happening globally across the auto space. So, it is a difficult field.
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From an EV perspective, China is clearly making an impact in many markets around the world. But clearly, domestic competition is starting to push them back a bit. So, especially on auto, it’s not an area where we have some exposure with Maruti, as I said, but we’re very selective about that, whereas Tata Motors has had constant issues with Jaguar Land Rover and that keeps us going. . Especially on that side of the field.
In the past few months and the kind of sideways move and correction we’ve seen, have you taken the opportunity to buy something new or increase your exposure to any sector?
Jonathan Shissel: Yes, it’s been interesting how the market has been struggling a bit, virtually at the same time as we’ve seen new moves from China, which has obviously caused some foreign investors to pull out of the index. A little bit maybe from a foreign investor’s perspective, looking at India, maybe in the very short term, it still looks a little expensive. So there is some uncertainty.
But obviously, the message we always give to clients is that this is a great market for the long term. Consumption, those sectors will be very excited. Yes, it is relatively expensive, but yes, there is a lot of structural growth that can play into the underlying index and certainly as we continue to look at India versus China, there are a lot of attractions in India that we are contending for. Search in China. So, yes, in the very short term, a little bit of money might come out, but I think over most of the time frame, it still looks pretty attractive.
Since you talked about consumption here and the long-term view, would you say that you would continue to have more exposure to urban consumption or niche consumption because rural consumption is obviously much more sensitive to inflation?
Jonathan Shissel: Yes, you are absolutely right. Where you can find consumption plays that are more structured in the urban sector, it makes more sense and obviously the rural sector is wider, but it is, as you rightly point out, more cyclical than what we are finding in urban areas. . Naturally, when you look at stocks that are more concentrated on the urban side, they usually trade at a large premium for the same reason. But yes, it is a very good field to play.
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