Further Schiessl says in autos, they have some exposure to Maruti, but they are quite selective about that. Tata Motors is having ongoing issues with Jaguar Land Rover and that keeps Schiessl on the sidelines in that sector.
What do you make of the real estate market in India if you have been tracking that? The upper end of the market was doing very well, but at some point of time, the cycle was expected to turn. Do you see that happening now or it is still a bit away?
Jonathan Schiessl: Yes, it is part of the Indian markets, which we do not do a huge amount of work on, if I am honest. We have looked at a few of the high-end developers previously, but obviously real estate of all industries is very localised. It is difficult to put a broad view on the entire space. But that said, clearly some companies in certain pockets have done extremely well more recently. Clearly, the underlying economy is humming along quite nicely and certain companies in certain localities are doing well but it is not something to focus on too much.
What is your sense on the entire real estate market here in India? It is coming out of almost a decadal of underperformance, a very long spree at that. But where next? Would you believe that at least in the near term, the stocks are priced to perfection?
Jonathan Schiessl: Yes, I think you are probably right. Clearly, there has been a lot of money going into the real estate stocks, particularly the better quality ones. But, the overall structural story for real estate in India remains one of a country that is in desperate need of more building, particularly of more sort of low-income type units. But obviously, that is not necessarily where the developers are focused. So, it is a very strong structural story.
But from a stock market perspective, there is the question of whether the companies at play are playing into the bigger picture or whether they are playing into more regional and local pockets of wealth, etc. So, one has to be careful in the stocks you are looking at, the land banks and everything else. So, it is an interesting play. But as I said previously, not one that we tend to get too involved with.
How are you positioning yourself for the consumption sector in India?
Jonathan Schiessl: Just talking about the autos, we have some exposure to Maruti. But clearly, on the domestic side, the rural side, it has been a bit difficult for that sector. But on the bigger picture side as well, there are some big structural shifts globally going on in the whole auto space. So, it is a difficult area.
China is clearly having an impact in many markets across the globe from an EV perspective. But clearly, the local competition is beginning to push back a little bit from that. So, particularly on the autos, it is not an area where we have some exposure, as I said, to Maruti, but we are quite selective about that, whereas Tata Motors is having ongoing issues with Jaguar Land Rover and that keeps us on the sidelines in particular to that sector.In the last few months and the kind of sideways move and correction that we have seen, have you used the opportunity to buy something fresh or increase your exposure to any of the sectors?
Jonathan Schiessl: Yes, it has been interesting how the market has struggled a little bit, pretty much virtually at the same time as we have seen new measures out of China, which has obviously caused some foreign investors to pull out on the index, obviously to come off a little bit. Probably from a foreign investor perspective, looking at India, probably in the very short term, it still looks a little bit pricey. So there is a little bit of uncertainty there. But obviously, the message we always give to clients is this is a great market to be in for the long term. Consumption, those sectors will remain very buoyant. Yes, they are relatively expensive, but yes, there is a lot of structural growth that the underlying index can play into and certainly when we continue to look at India versus China, there are a lot of attractions in India that we just are struggling to find in China. So, yes, in the very short term, there might be a little bit of money coming out, but I think in most of the time frames, it still looks very attractive.
Since you did talk about consumption and a long-term view here, would you say that you continue to have a bigger exposure to urban consumption or niche consumption so to speak because rural consumption clearly has a lot more sensitivity to inflation?
Jonathan Schiessl: Yes, you are absolutely right. Where you can find consumption plays which are more geared into the urban sector, it does make more sense and obviously the rural sector is huge, but it is, as you rightly point out, more cyclical than what we are finding in the urban areas. Obviously, when you look at stocks that are geared more into the urban side, they generally trade at a bigger premium for exactly that reason. But yes, it is a very good sector to play.