Schroders, the British asset management firm overseeing $1.06 trillion globally, is adopting a cautious stance on major investments in India, according to Richard Oldfield, the group's chief executive. In an exclusive interview, Oldfield, who was visiting India for the first time since assuming his role, conveyed that the firm is currently "slightly underweight" on Indian equities. This decision is rooted in concerns about sluggish economic expansion and high valuations within the Indian market.
Oldfield noted that several factors contribute to this cautious outlook. He pointed to the increasing availability of diverse asset classes for investment and the fact that valuations in India have reached a high point. He also highlighted the drag that IPOs have had on equity markets. He observed that many investors are gravitating back to their standard allocation levels in India, often through broader emerging-market or global funds, instead of making direct, India-specific investments.
Despite the present hesitancy, Oldfield articulated conditions that would shift Schroders' outlook to a more bullish perspective. "We would want to see economic and market performance start to tick up," he stated. He expressed optimism about the potential for improved domestic consumption driven by tax and GST changes. Furthermore, the increasing flow of domestic capital into equities is creating a market floor. However, he cautioned that this liquidity is primarily being used to absorb the supply of IPOs rather than driving up prices in the secondary market.
Oldfield also touched upon the current investment climate, referencing the phrases "FOMO" (fear of missing out) and "FOBO" (fear of a better offer). He explained the dilemma many investors face: the reluctance to withdraw funds from the still-rising US equity market, versus the risk of incurring substantial losses by waiting too long. He believes that investors recognize the need to rebalance portfolios and rethink portfolio construction to address over-concentration, but are struggling with determining the optimal timing.
Schroders' CEO highlighted the continued strong demand for gold as an asset class, driven by central banks, sovereign wealth funds, and large family offices. This demand is expected to sustain increases in gold prices.
While currently adopting a cautious approach, Schroders acknowledges India's significant long-term potential. Improved economic performance and more supportive valuations would lead to a more constructive outlook on Indian equities. Oldfield's comments suggest that Schroders is closely monitoring the Indian market and is poised to increase its investments when macroeconomic conditions and market dynamics become more favorable.
