«We have no wars to fight»

This also has to do with the history and culture of the subcontinent. «The British left us the legal system and political institutions, but culturally India belongs to Asia and also maintains close ties with the Middle East. Economically, the exchange with the USA is important, and many leaders in large US companies have Indian roots.» In the past, multinationals only maintained call centers in India. That has changed. Bose: «Today, tech companies have their development centers here, including those from South Korea, Japan and China.»

Taj Mahal in Agra, India (Image: Sylwia Bartyzel, Unsplash)

But why is India, as a BRICS member, maneuvering in the Ukraine conflict and not clearly taking the side of the West? «Historically, Russia has long supported India in difficult times,» explains Bose. «India does not belong to one camp, we maintain relations with all partners and have no war to fight.» The unipolar world dominated by the USA would turn into a multipolar one.

«Too many smart people hunting in the same territory»

But why is the fund manager so interested in the big picture of the global economy and geopolitics? It's not just because these factors help him build a case for investing in India, but also because he takes a macro approach to stock selection. Macro in terms of themes that will play a major role in India in the coming years, such as infrastructure, logistics or digitalization.

«There are 45 fund houses and 500 independent fund managers in India, 120 of which are based in the same building. 99 percent of all managers rely on classic stock picking and try to track down undervalued small and mid caps,» says Bose. The consequence: «Too many smart people are hunting in the same territory.» His fund, on the other hand, is geared more towards larger stocks and the portfolio is clearly structured with 20 to 30 individual positions. «We only invest in a company if we have a convincing macro argument for it—one that aligns with the chosen theme.»

What Speaks Against Passive Investments

If Bose's forecast is correct and the stock market in the emerging market really does outperform, why shouldn't investors simply and cost-effectively participate passively in the attractive market with exchange-traded funds (ETFs)? «The positive momentum we expect only directly affects a small proportion of listed companies. Those who invest passively also invest in the «old winners»—those companies that have already capitalized on previous growth,» Bose explains.

«We select the 20 percent of companies that will benefit most from the momentum over the next 20 years and will then account for 60 percent of market capitalization.» In addition to alpha, the fund manager mentions another source of income: «We keep losses to a minimum and lose less than the market as a whole.»

Still in the Shadow of Wall Street

Bose sees the American stock market, rather than the Chinese one, as a competitor for India. «Of course there are temporary shifts in emerging market funds between India and China, but the emerging markets have generally been neglected in recent years because the performance of the US market—driven by large technology companies—has simply been too good,» he explains. And in view of the gigantic market capitalization on Wall Street: «If just a few percent were to be shifted from the US to emerging markets, that would be a huge amount for India.»

Red Fort Lahore (Image: Shutterstock)

Stefan Kräuchi, Partner and CEO of HSZ Group, which a few days ago presented a planned equity fund India under the label Prana India Equity (with various tranches) in cooperation with Oaks Asset Management in Switzerland, points out another aspect. «We have found that many investors are not really happy with their emerging market investments. One market performs, the other loses, the price movements often balance each other out.»

And he sees a lot of potential: «In terms of economic performance and market capitalization, the emerging market ratio is often still far too low. The US market has done very well, but that can't go on for years.» He sees the new India product as an ideal addition to the HSZ Group's previously China-heavy offering.