India Strategies for Maximizing Returns

How to embrace a selective approach to manage the rich valuations of a growth market

India is a long-term structural investment story but it isn’t cheap. To get the most from India we believe investors should adopt a selective approach in order to stay aligned with the country’s long-term value creation while not being distracted or paying too much for shorter-term, lower-growth opportunities.

By focusing on sectors like industrials and manufacturing that are at the forefront of India’s structural momentum, investors can position their portfolios for potential outperformance over time. Quality and fundamentals are paramount. Evaluating company characteristics, such as profit growth, cash flow and business model, can help identify promising investment opportunities that are aligned with India's economic growth trajectory.

Growth at the right price

India has delivered for equity investors in recent years and many stocks and sectors now command elevated prices. In fact, over the last 10 years, multiples on Indian equites have been at a 57% premium on average to emerging markets.1 So it’s crucial to assess company earnings projections against earnings multiples before committing to a stock. Investors need to be sure that a company’s fundamentals and growth potential justify its price tag.

While valuations are elevated across many stocks and sectors in India, we would also say that the robust economic growth underpinning India's equity markets means that there are choices available for active investors. For example, if we sell a holding because we believe its growth potential is too out of line with its valuation we know there are other growth opportunities in the market with better pricing that we can look to.

Get the best from India

Tracking an index may have been an effective investment strategy in recent years but we don’t necessarily think all boats will continue to rise in India. Equity benchmarks, in our view, increasingly reflect the “older India,” one that is more rooted in commodities and consumer staples. In contrast, newer areas of growth, like industrials and real estate, are under represented by benchmarks, we believe. As active managers, we can give these sectors a greater focus in our portfolios while still being cognizant of companies and sectors that are benefiting more generally from India’s structural growth like health care and utilities.

New and the Old

Actively hunting for opportunities close to and further away from popular investment areas is key to getting the best from India


Old India

Health care
Information Technology
Consumer Staples

New India

Financial Services
Consumer Discretionary
Real Estate

Source: 1CLSA, as of Feb. 27, 2024



The views and information discussed in this report are as of the date of publication, are subject to change and may not reflect current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. Investment involves risk. Investing in international and emerging markets may involve additional risks, such as social and political instability, market illiquidity, exchange-rate fluctuations, a high level of volatility and limited regulation. Investing in small- and mid-size companies is more risky and volatile than investing in large companies as they may be more volatile and less liquid than larger companies. Past performance is no guarantee of future results. The information contained herein has been derived from sources believed to be reliable and accurate at the time of compilation, but no representation or warranty (express or implied) is made as to the accuracy or completeness of any of this information. Matthews Asia and its affiliates do not accept any liability for losses either direct or consequential caused by the use of this information.