India’s economic growth story is phenomenal, but the question of where investors should put their money is not always simple, and one Blackstone executive points out a common mistake. According to the Indian finance ministry, India is on track to become the world’s third-largest economy by 2027. India’s stock market has also been a hot topic this year, overtaking Hong Kong to become the world’s fourth-largest in terms of total market capitalization of listed companies. India’s benchmark indexes have been hitting successive all-time highs throughout the year, with the Nifty 50 and BSE Sensex indices up nearly 20% and 17.5% year-to-date. But focusing too much on the macro story can be dangerous for investors, according to Amit Dixit, head of Asia at Blackstone Private Equity. “A rising tide doesn’t float all boats. Everyone knows it’s macro that’s going to India,” Dixit said at the recent Milken Institute Asia Summit in Singapore. “But if you invest solely on that theory, you’re going to be screwed. The way you make money is in micro units. You need to own specific micro units.” Speaking to CNBC on the sidelines of the conference, Dikshit said he sees potential in technology, consumer, healthcare and unregulated financial services sectors. The list of companies Blackstone has invested in India is extensive, but he highlighted companies such as information technology services company Mphasis, IT service management company R Systems and auto parts maker Sona Comstar. “It’s not an easy place to do business” Blackstone began investing in Indian companies and assets 19 years ago, but Dikshit said the first five years were a “tough start.” “Even now, it’s not an easy place to do business for foreigners,” he said. Foreign investors are not allowed to buy shares directly through online trading platforms, but they can invest in the Indian market through mutual funds and exchange-traded funds (ETFs). Additionally, American Depository Receipts (ADRs) and Global Depository Receipts (GDRs) allow international investors to access foreign stocks through their home stock exchanges. Dikshit recommended a barbell strategy, especially for chief investment officers (CIOs) considering investing in India. This means placing an overweight on two distinctly different assets (usually high and low risk) as a hedge against uncertainty. “I think you can make a lot of money as an investor at either extreme,” he said. Manraj Sekhon, chief investment officer at Templeton Global Investments, also shares Dikshit’s optimism about India’s growth on the back of a variety of factors, including a shift towards manufacturing, a digital push that makes trade and commerce easier, and a rising middle class. Sekhon also touched on India’s long-term growth story and the fact that investors are ready to pay a premium due to its lack of correlation with global variables that impact most markets. He highlighted that with growth rates slowing across the globe, the situation in India is just the opposite. “In terms of valuations, India will continue to trade at a premium. Given what’s happening there and what’s happening elsewhere, India probably deserves that treatment,” the chief investment officer said during a panel session at the Milken Asia Summit. “Looking back over the last 10 years, if you had stayed in Indian (equities), you would have made about 150%. … (But) if you missed the best 10 days of that decade, your return would have been 50%,” Sekhon said. He also warned that India’s phenomenal growth cannot be guaranteed to continue, as it is the result of a confluence of factors that have already been “playing out for decades.” “As market participants, we have to be cautious on this as well, because it is probably the most favored asset class in the stock market today, along with some of the US tech companies. But this has happened over a long period of time,” he added.
Blackstone reveals how to make money in India and mistakes to avoid