India is the “best structural story” among emerging markets by far, according to Goldman Sachs strategist Sunil Koul. It’s time for investors to consider getting back into India, Koul, who is vice president of Asia Pacific portfolio strategy at the investment bank, told Tech Zone Daily’s “Street Signs Asia” on Friday. “The amount of interest we are seeing, especially from global investors, is off the charts,” he added. That’s despite Indian stocks already soaring, with the country’s benchmark indexes BSE Sensex and Nifty 50 soaring to new record highs on Friday, according to Refinitiv data. “Valuations are expensive, that’s for sure,” Koul conceded. “But we take comfort in the fact that the fundamentals are so strong, macros look very stable. You have earnings that are growing at 15% plus in the first quarter. Numbers are pretty strong.” He advised investors to buy “every possible weakness.” “I think you are still able to find some good quality companies at reasonable valuations,” he added. Historically, India has a “very strong” track record of generating returns, according to Koul. He said that Indian stocks have a 16% compound annual return over the last 20 years in local currency terms, and 13% in dollar terms. That’s twice the rate of broader emerging markets. As such, he described India as “the most fertile ground for picking stocks.” It also has a high proportion of what Goldman analysts dub “multibagger” stocks, according to Koul. These share a number of traits including high realized growth rates, high capital return ratios and inexpensive starting valuations. What to buy Koul told Tech Zone Daily Friday that he still likes banks, as valuations are less expensive. “Banks are the one sector that’s still trading at mid-cycle valuations. They’re gaining market share from non-banks,” he said. Goldman Sach screened 25 large-cap Indian stocks for those with an attractive growth and valuation profile. Four banks meet its criteria: HDFC Bank , ICICI Bank , State Bank of India and Kotak Mahindra Bank. Shares of HDFC Bank and ICICI Bank are traded in the U.S. Global investors who want to gain exposure to Indian stocks including the State Bank of India might want to consider an India-focussed ETF, such as VanEck India Growth Leaders ETF. SBI accounts for 4.4% of the fund. Kotak Mahindra Bank is accessible via the Nifty India Financials ETF, where it makes up 4.3% of the ETF’s holdings. Koul also likes names in infrastructure and cement, with UltraTech Cement and construction company Larsen & Toubro both showing up on Goldman’s screen. UltraTech Cement is available to global investors via the ProShares MSCI Emerging Markets Dividend Growers ETF, where it accounts for 2.7% of holdings. Larsen & Toubro is held in the iShares India 50 ETF, with a 3.5% weightage. — Tech Zone Daily’s Michael Bloom contributed to this report.
