Global Growth Slowdown Positive For India, Says Cartica’s Gingold

Emerging markets like India will attract foreign funds as growth slows in China and other developed economies, according to Katalin Gingold, managing director at Cartica Management LLC.“It’s a very positive scenario for India,” Gingold, who heads the $2.6 billion Cartica Management LLC long-only fund, said in an interview to BloombergQuint. “As long as you have stability of growth even at the lower level, foreign capital will start looking for opportunity and India is exactly this opportunity.”Cartica expects India, which is also its biggest emerging markets bet, to do well as the economy is domestically driven. While it doesn’t see a “steep rebound” in the global economic momentum or the Chinese economy in the near-term..China’s growth is slowing on a structural basis. Any major stimulus that has the potential to reflate the economy will also increase the risk in the financial system in China. We think they will put a floor (limit) on their growth and we will see its impact in the second half of the year.Katalin Gingold, Managing Director, Cartica Management.The International Monetary Fund pared its growth forecast for the world economy this week amid signals of higher tariffs weighing on trade. The rate was cut to 3.3 percent, the slowest since 2008 global financial crisis..Bullish On Financials.The Washington-based fund mainly invests in small- and mid-cap stocks.Gingold expects “high” earnings growth for private and state-run banks in the near term, while she remains bullish on the financial sector in the one- to three-year time frame. “Clarity in election outcome and a growth rebound in the second half of 2019 will result in a ‘really great year’ for Indian equities,” Gingold said..Other Highlights:.Elections will not have a lasting market impact as two main parties have similar ideological approach to the economy.A turn in the growth cycle will benefit mid-cap stocks in 2019.Cartica, which has exposure in mid-cap auto stocks, termed the aberration in the industry temporary. It called it an after-effect of the liquidity crunch among non-bank lenders..Watch the full interview here.Here’s an excerpt from the interview:.In 2018, you said that your fund suffered because of a market pullback. Primarily, the pain came in the broader market space. Do you see re-balancing of that happening in 2019? Will money move back into more of the depressed companies?Last year, the market move was very narrow. Only a few stocks held up the index. It ended up outperforming emerging markets, but you only outperform if you are in those few stocks. Our mandate is small and mid-cap stocks. So, we by definition, don’t invest in those large companies. In small and midcap space, there are some technical drivers on performance. You have drivers, which are more linked to the domestic economy and their higher exposure to it. In that sense, we are expecting a turn in the growth cycle in India. That will benefit the small and mid-cap names.Valuations are also very attractive. Some of the companies which we own deliver 20-25 percent earnings growth with 25 percent cash flow growth. We have been delivering this type of returns consistently over the last five years during a difficult period from an economic perspective in India. As we go forward and the economy picks up, these returns will only grow. These high-quality companies are now trading at very attractive valuations if you look at them from a franchise-value perspective. Domestic exposure, small and mid-cap exposure, is definitely the place to be in today for a six month to a one-year time frame.

Global Growth Slowdown Positive For India, Says Cartica’s Gingold

India will attract foreign inflows as its growth is less dependent on global economy, says Katalin Gingold of Cartica Management.

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