Equities should outperform cash over the medium to long term: 3P Investment Managers' Prashant Jain

Jain adds that the team's optimism for India also comes from the steady growth in the Indian economy, Several structural factors are driving this growth, including favourable demographics, rising incomes and low penetration of discretionary goods and services, external environment for manufacturing and services offshoring, headwinds for several emerging markets (EMs) and sharp improvement in India’s physical, digital and regulatory infrastructure.

Veteran fund manager Prashant Jain remains confident in the medium to long-term outlook of the Indian economy, corporate profits, and equity markets. In 3P Investment Managers' quarterly newsletter, Jain notes that it is this optimism for the Indian economy that has led them to maintain a near-fully invested position in the market, despite some signs of overvaluation.

“In our assessment, equities – especially large caps – should comfortably outperform cash over the medium to long term, largely driven by earnings growth,” he says.

One of the key factors for remaining fully invested, according to Jain is India's favourable tax policies. “The long-term case for equities is further bolstered by the significantly lower taxation of capital gains on equities compared to cash. Consistent with this view, the Fund continues to remain close to fully invested,” he explains.

Jain adds that the team's optimism for India also comes from the steady growth in the Indian economy,  Several structural factors are driving this growth, including favourable demographics, rising incomes and low penetration of discretionary goods and services, the external environment for manufacturing and services offshoring, headwinds for several emerging markets (EMs) and sharp improvement in India’s physical, digital and regulatory infrastructure.

“India’s economy continues to progress steadily, supported by improvements in its physical, digital, and regulatory infrastructure. These developments, combined with headwinds for several other emerging markets, position India for sustained and higher economic growth in the coming decade,” he says.

Going forward, he notes that they expect a compound annual growth rate (CAGR) of around 7 percent for the Indian economy, which could increase both per capita income and India’s share in the global economy.

While the long-term outlook remains positive, Jain noted that the economy is facing some short-term challenges. “The current consumption slowdown is likely a result of past growth being driven by leverage and the slowdown in exports can be attributed to a weaker global economy and surplus capacities in China,” he says.

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