Emerging Markets Will Be Growth Drivers In A Global Recession, Says Andrew Holland

Emerging markets will be the main growth drivers when the global downturn or recession starts and interest rates fall, according to Avendus Capital’s Andrew Holland.

Although the growth of India’s exports may slow down, with the current infusion of government and private capital having a multiplier effect, the country’s domestic growth will remain strong, Holland, chief executive officer at Avendus Capital Alternate Strategies, told BQ Prime. "If the markets were to correct, I would be a buyer into the dips and be more constructive on the markets, going forward."

Despite short-term difficulties, India's mid-cap companies are just beginning to realise their potential for domestic earnings, he said.

According to him, the easing in oil and commodity prices coupled with the potential for the Reserve Bank of India to cut interest rates by 250 basis points, will build a solid foundation for the growth of the Indian market.

India's loss during a global downturn would be just half of what the global markets would experience, Holland said.

India is experiencing a significant increase in both public and private capex, he said. Order flows were the focus of earlier capex cycles as well, but this time around, Holland places more emphasis on order execution.

Businesses will benefit from higher margin, and India can become a manufacturer for the rest of the world if corporations choose to locate their factories in the country, Holland said.

Some companies have considered moving to and investing in India for their manufacturing requirements, Holland said. Many nations are attempting to dissipate potential risks related to China, which is a significant factor in this change, he said.

India is getting acknowledged because of Prime Minister Narendra Modi's recent excursions, according to him.

There have been reports that India's rating may be upgraded, a development that seems especially appropriate given the nation's high stability, he said.

From a medium to long-term perspective, Holland remains bullish on sectors such as beverages—alcoholic and non-alcoholic—and electronics.

Indian consumers switch quickly from less expensive to premium products, according to him. With the rising popularity of specialised restaurants—with a variety of alcoholic and non-alcoholic offerings—the beverage sector's current trends will continue in the years to come, he said.

In the electronics industry, he sees potential for both local and export growth and expects many more companies to enter the space.

There are a very small number of players with a high P/E ratio in these two sectors, Holland said. Thus, their current high valuation would be justified if the companies were the only ones still in existence in five years, he said. 

Holland is also optimistic about defense, railways, domestic spending, airlines, and hospitality on a national level.