Remain Constructive On India, Increased Exposure Post Recent Sell-Off: M&G Investments’ Vikas Pershad

Leading global asset management firm M&G Investments has increased its fund allocation to India following a five-month market sell-off that ended in February, according to Vikas Pershad, Portfolio Manager of the firm.

In a conversation with NDTV Profit on Tuesday, Pershad outlined a constructive long-term view on India, while remaining cautious on IT services and microfinance sectors.

“India overall is relatively safer than other countries, which is why we have increased our allocation across the firm to India. Late February to early March was a great opportunity for us to increase our India allocation because of the five-month sell-off. What has not changed in the past year is our constructive view on India,” he told NDTV Profit. 

Pershad said that increasing exposure to India was part of a broader strategy to converge the firm's India exposure with its allocations in other parts of Asia, particularly North Asia. He added that the pace of the recent market rebound has been surprisingly quick given existing uncertainties. He attributed it to the fact that "a lot of bad news was in the price" at the end of February, following the extended sell-off.

Pershad outlined that India is one of the best markets in the region, as it appears from the fact that it was the first market to erase the losses incurred due to the tariffs imposed by US President Donald Trump. He emphasised India's appeal as a “broad and deep market” with over 1,500 listed companies boasting market caps above $100 million.

“More than 70% of India's revenues for the NSE 200 come from within India, and that number is growing. If you look at the US, less than 60% of S&P 500 revenues are from within the US, and that number is falling. So when you look at India, it is a largely domestic story,” he said.

Domestic orientation and insulation from global geopolitical events remain important yardsticks for judging investment options for M&G Investments. “We've been on the lookout for entirely domestic stories that are not contingent on the new policies coming out of Washington or Beijing or Tokyo. And there are plenty of choices in a market like India. Music streaming is one area that we're excited about,” he said. 

One difference between the end of 2024 and the beginning of 2025 is the increased exposure to healthcare services. Some of this has come by shifting the allocation from pharmaceutical holdings. 

He noted that there is uncertainty in the automotive space, auto parts and auto ancillaries. Similarly, the outlook for IT services has also become “a little bit cloudier”. Underlining a fall in the performance of these sectors, he said the company has taken advantage of this situation to “add back some exposure at the margin to both of these sectors”.

IT services, despite recent underperformance, have seen marginal additions to M&G's portfolio. Citing lacklustre earnings from larger IT firms, he expressed a preference for smaller companies. 

“We remain underweight in the IT sector. The name count that we have in that sector is very low. It's the lowest it's been in years, actually, since just before COVID. But when we look prospectively, and we look at the valuations, and we look at the magnitudes of some of these falls, then yes, we've started to reduce that underweight, but not materially so,” he said. 

M&G has been particularly active in increasing its holdings in the financial sector, especially in private banks and Non-Banking Financial Companies (NBFCs). He called microfinance “tricky” and said the firm has no direct exposure to the sector. 

On the macroeconomic front, Pershad dismissed concerns about a potential economic slowdown impacting India's market multiples. He argued that India's long-term earnings growth remains intact, even if FY26 growth slows to 12% from 15%. The portfolio manager believes that the Indian market "can and should" trade at higher multiples even if aggregate earnings growth moderates from recent high levels.

“India remains a very good market for long-term, absolute equity return appreciation, equity appreciation. But it remains a great market for active managers as well for relative stock picking,” he said. 

He highlighted the drying up of India's IPO pipeline, noting that while equity capital market activity has slowed, M&G remains selective in evaluating new listings. The firm anticipates a pickup in IPOs as markets recover.

Pershad acknowledged gold's appeal in an uncertain environment, but clarified that M&G does not directly incorporate gold into its equity portfolios. “I'm not surprised gold prices are rising, and I wouldn't be surprised if they continue,” he said. He admitted a personal affinity for the asset but added that M&G's portfolio does not have a macro view on the commodity.

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