Stay invested, rather than exit to buy India at higher levels: Gary Dugan of Global CIO Office

Stay with India's ups and downs, rather than run away to buy back at higher levels: Gary Dugan of Global CIO Office

India's recent outperformance compared to major global indices has prompted more investors to look at the country as a differentiated market from the rest of the emerging pack. One such investor - Gary Dugan, CEO, The Global CIO Office - is betting on staying invested in India for the longer run.

Dugan said it is hard to find elsewhere the kind of consistent, quality growth that India has shown in recent years, making a strong case for investors to not churn out during bouts of volatility. "Its better to put a marker down and stay engaged through its ups and down, rather than run away and then buy it back at higher level," Dugan told CNBC-TV18 during a conversation on the sidelines of the Motilal Oswal Annual Global Investor Conference earlier this week.

Nifty has delivered a near 14 percent return so far this year, lagging behind USA among major markets, with Nasdaq gaining 19 percent on YTD basis while Nikkei 225 has risen by 14 percent.

India's gap with China in the MSCI index for emerging market is also narrowing down, making a strong case for further foreign inflows as more stocks get added to the indices. China accounts for 22.33 percent of the MSCI Emerging Markets Index, while India is slightly under 20 percent, as of August 2024, followed closely by Taiwan. Before Covid, in 2020, China accounted for 40 percent of the MSCI EM Index.

Compared to China, India has emerged as a stronger bet for foreign investors, riding on robust GDP growth, a sizeable consumption market and and emerging manufacturing hub.

Gary Dugan is advicing his global clients to look at India as ex of emerging markets. "India's consistency and projected profit CAGR of 15 percent over next 5 years stands way above anything else delivered in the market," he added. Once considered more of a tactical bet, Dugan said India has shown in the last 5-6 years that it is wrong to run away at the sign of a bit of a crisis. "India was thought of as a tactical market, you're in it one day, and then there is a bit of a crisis, and you run away. The last 5-6 years has told you its wrong to run away," said Gary Dugan.

Risk Factors

He caution India about the changing interest rate scenario in USA, as Fed pivots to possibly three rate cuts in 2024. The uncertain geopolitical siutation and oil prices could throw up a challenging scenario. "May be (US) inflation has not been completely supressed and if we were to see more geopolitical crisis in the middle east, with higher oil, we could be talking about a Fed that stops cutting rates. That could put pressure on EM currencies, and make the environment risk off," Dugan added.

The Global CIO Office is considering the geopolitical risk as a serious factor, and when a war brewing in Ukraine and the Middle East on the boil, there could be a negative surprise that may prompt people to 'take money off the markets, precipitating a downdraft in equities'.

Hot Bets in India

For Gary Dugan, consumption and electric mobility are strong emerging themes in India. As the disposable income at the hand of the people rises, he sees a broader spectrum of services benefitting, ranging from shops, malls, and hotels. "All these significantly increase the potential of the economy to grow much faster," he added. Gary Dugan also called the digital payments ecosystem in India as a big transformative change.