Page 6 - DIY Investor Magazine Issue 24

CATCHING THE FLIGHT TO QUALITY
• Global and domestic factors are contributing to short-term volatility, but the longer term outlook remains positive.
• Tough conditions and a flight to quality are creating opportunities for companies to consolidate their positions.
• The trust is well positioned in the current environment, benefiting from strong domestic consumption themes and companies with good management track records.
‘THE MARKET REMAINS STRUCTURALLY ATTRACTIVE OVER THE LONG TERM AND THERE ARE STRONG COMPANIES THAT WILL GET STRONGER’
The macro outlook for India remains challenging amid global uncertainties, slowing domestic growth and concerns over certain sectors.
There’s unlikely to be any real pick-up in the next 12 months and the reforms put in place by the government have been disruptive, albeit we expect the short-term pain will produce long-term gains.
It’s a tough environment that has its advantages, however, both for the trust and for certain types of companies in India.
My most recent visit - which took us to Bangalore, Delhi, Chennai and Mumbai - was particularly informative because companies tend to be much more realistic when the outlook is challenging.
But it was clear that the market remains structurally attractive over the long term and that there are strong companies that will get stronger with each cycle.
By Kristy Fong,
Investment Director
Aberdeen New India Investment Trust
We have been able to find companies able to take advantage of the current challenging environment to consolidate their markets simply by doing better than their competitors.
Some are also benefiting from a flight to quality.
Real estate offers a good example. This is a very difficult sector to be in currently, with a glut of uncompleted projects that has contributed to excess housing supply.
‘WE WILL CONTINUE TO FOCUS ON THE QUALITY OF MANAGEMENT TEAMS AND LOOK FOR COMPANIES WITH STRONG BALANCE SHEETS’
But there is a positive theme emerging.
While many developers are unable to secure funding, there is still strong demand for those real estate companies with a good reputation for completing high quality projects.
With the competition struggling to deliver, there has been a flight to quality companies such as Prestige Group
and Godrej Properties, which have good balance sheets and cash flow and are finding opportunities to buy better assets for cheaper.
DIY Investor Magazine | Apr 2020 6