La Pace (Gsam): “Hunting for opportunities among Indian stocks”

Domestic consumption and investments are worth 70% of India’s GDP. This explains why the Subcontinent’s stocks attract the attention of many money managers, seeking protection from the impact of global geopolitical tensions. We talked about it with Loredana La Pace, country head Italy of Goldman Sachs Asset Management.

Where do you see the biggest investment opportunities in Indian equities?

“We see opportunities in several areas of Indian equities. As active investors with a bottom-up approach, we look at companies with strong fundamentals and, for example, the small and mid-cap segment is highly inefficient, with low research coverage by analysts and therefore presents several opportunities for generate returns. We are also finding some interesting opportunities in the materials sector: Indian companies are becoming important R&D and manufacturing partners for global pharmaceutical and agrochemical companies, as the big names in the market diversify their supply chain. In the Indian economy, mainly driven by the domestic market, consumption and domestic investments represent 70% of GDP: we see opportunities in segments linked to the domestic market such as consumer discretionary and financial goods. Finally, the financial sectors in the country are benefiting from the cyclical recovery, the growing financialisation of household savings and the introduction of digital payments.”

Having said the strengths underlying the economy, do you also see structural reasons to invest in the Subcontinent’s stocks today?

“The country’s short-term cyclical context is gaining momentum, thanks to the recovery of economic momentum, an expansion of the sectors recording profit growth and the recovery of the corporate Capex cycle (cash flows intended for investments in fixed assets , ed.)”.

Given that diversification is the golden rule of any investment, what is the level of correlation between Indian equities and global indices?

“Indian equities are among the least correlated asset classes not only to emerging markets in general, but also to global indices – the correlation is decreasing as a result of strong domestic drivers and compelling earnings growth. In our view, this makes Indian equities a good diversifier in a portfolio and drives the case for a specific allocation to this asset class, which continues to outperform its peers after posting resilient returns in 2022 and 2023. Additionally , India being a domestically oriented economy, stocks are less affected by global macroeconomic issues.”

Are there sectors more exposed and others less?

“India’s sectoral composition is diversified, with exposure – as mentioned – above all to the domestic market, such as consumer goods, finance and healthcare, which corresponds to approximately 58% of the MSCI India IMI index”.