Wanted your take regarding consumption as a basket? Now, overall demographics of India are quite strong right now and rural recovery is also what the people have been talking about. How should one play the entire consumption theme in India you believe?
Jonathan Schiessl: It is clearly a fantastic opportunity in the whole consumption space. I think interestingly enough there are various ways you can play the consumption theme. Nothing too new for me here, really. I mean, financials are a broad way of playing increased consumptions. Obviously, as you point out, some of the actual FMCG companies themselves another way to play it. There are various ways to play it.
I think broadly speaking, the market does offer a lot from a consumption perspective. So, multiple sectors and it is a very exciting space and has been for some time.
Wanted to get your thoughts in on FMCG, because up until from COVID to now we have only seen urban India binge on to the consumption spree and now rural seems to be making a comeback. Tactically, would you think that this makes for a good investment and do you actually see a meaningful recovery at play when it comes to rural spend in FMCG?
Jonathan Schiessl: Yes, you are quite right. I think a lot of analysts have been waiting for this rural spend to pick up for a while. And clearly, as you say, it seems to be coming through now. It looks pretty sustainable to me. Obviously, it swings between urban and rural on a short-term basis from a consumption perspective. But overall, I think, consumption still remains the cornerstone of the India story and broadly speaking it continues to look good to us actually.
Financialization of savings is a big theme that has been working in India and it is just expected to accelerate. Do you think it makes sense to invest a part of your portfolio into this financial market ancillaries?
Jonathan Schiessl: Absolutely. I mean, clearly, it is a trend with a long way to go, as you say and there are various ways you could invest in some of these non-bank financials, which are a direct play on it or even obviously some of the banks as well are clearly going to benefit from that trend. But it is definitely a trend that I think has further to go and it is certainly one which India has offered for some time and still will offer for some time in the future. On the entire energy transition theme, because many in the market do believe that this is going to be a multi-decadal opportunity and given the vast supply chain and the various mediums of energy that are being looked at, as opposed to traditional fossil fuels, this could really throw up a sizable opportunity for investment as well. Your thoughts?
Jonathan Schiessl: Absolutely, it is a huge, huge transition which is going to take decades. I think the issue, obviously, is financing and technology. Certainly, in some markets elsewhere in Europe and the US, there has been a little bit of a pushback about the whole move because of the sheer cost involved and obviously the infancy of many of these technologies.
Yes, some of these technologies certainly are getting more efficient and better, but the whole infrastructure that needs to be set up is going to take some time to roll out as well. I think it is an interesting sector. The move towards it globally is something which is not going to be turned back, but it will take time and yes, time and money.
Then, which are the themes which you would recommend to avoid a profit book right now because a lot of segments have run up and there might be some sort of churn, which are the spaces that you think have topped?
Jonathan Schiessl: That is a difficult one. Certainly, when you look at the Indian market vis-à-vis other emerging markets, it has done incredibly well. A lot of domestic retail savings have been going into the equity markets, chasing IPOs, and it carries on going higher.
I think India, just in the short term, is at risk potentially of a little bit of a sell-off. I am not saying a major reversal, but some of the hottest sectors, particularly in the midcap space and below, probably need to just let off a bit of steam.
When we look, the financial area still looks good to us. The banks still look good to us. IT globally, the IT sector looks okay. I think the trends there are very healthy. So, broadly speaking, the broader market probably needs to come off a little bit, but overall, we are still bullish on India on a medium and longer term view.
What about autos as a theme, do you think that has peaked out and this entire EV disruption and the kind of policy changes that are happening make it difficult? What is your investable theme as far as autos are concerned?
Jonathan Schiessl: Yes, this space, the whole EV discussion clearly is a complex one. It is particularly in a market like India where some of the roads in the major urban areas are clearly already very congested and the infrastructure still needs to be rolled out, certainly in the EV side, I think the trend is clearly shifting towards that space, but possibly not as fast as many had originally expected and then clearly you other issues around, yes, the cost of the batteries have come down substantially, but it will be interesting to see if more of the traditional local suppliers in India can really step up into this space.
So, it is a fascinating space. Perhaps growth expectations are a little bit too high just at the moment and if you look in some other markets, the plug-in hybrids seem to be the solution in the very short term.
