Posted October 5, 2014 5:42 pm by Comments

Gary Greenberg, head of emerging markets at Hermes Investment Management and the lead manager of the £300m Hermes Global Emerging Markets fund, is overweight in India but he believes that Indian stocks bought in anticipation of reforms by Narendra Modi are now overvalued. A recent FE Trustnet article about fund managers investing in India quoted him as saying:

“India equities are fairly valued overall – neutral to the long-term mean – but within that the Modi stocks – infrastructure related and industrial – are pretty overvalued.”

“They are trading on the hope that major secular transformation takes place over the next year or two. However, Modi’s political power is constrained, he has six or seven states behind him but the rest will take some persuading.”

“While we have an overweight we are not betting on that. Our portfolio is full of non-Modi stocks such as Power Grid, all high quality, all weather companies.”

Greenberg also believes that emerging market sell-offs will become less of a feature in the emerging market asset class as such countries become less focused on exporting:

“The external accounts of emerging market countries are much better than they were in previous crises. They have much higher foreign exchange reserves and a lot of their debt is now in local currency and so they don’t have the same amount of vulnerability they once had. They have learnt from previous lessons.”

“The old order, both globally and for emerging markets, is definitely over and we all know that. The low cost manufacturing and exporting to the developed market consumers who are taking on more and more debt is definitely over.”

To read the whole article, Greenberg: I’m overweight India but not betting on Modi stocks, go to the website of FE Trustnet. In addition, checkout out our India ADR list.

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