Lunate sees India as a standout emerging market, but stresses valuation discipline

Summary

While the Abu Dhabi asset manager sees strong long-term macro tailwinds in India, it warns that elevated asset valuations demand a selective and price-conscious approach.

Abu Dhabi-based Lunate, which manages $125 billion in assets, views India as a standout emerging market, driven by a decade of resilient economic growth and deepening capital markets, a top executive at the investment firm told Mint.

"India offers strong growth tailwinds and a wide range of attractive investment opportunities. While global investors often focus on funding costs and interest rates, our higher-(interest rates)-for-longer outlook is primarily driven by strong economic growth," Lunate's head of investment research Caesar Maasry said in an interview.

"We believe the funding-related headwinds facing India are less severe than many investors fear, and we do not expect a repeat of the challenges seen in the 2010s or the 1990s," he added.

Maasry is responsible for the firm's macroeconomic views and return forecasts across public and private markets. These forecasts drive the asset allocation process across Lunate's various investment strategies.

Before joining Lunate, Maasry spent more than two decades at Goldman Sachs across New York, London, and Hong Kong, eventually heading the firm's global emerging markets research team based in New York.

With a core focus on private markets, Lunate works with a diverse client base that includes institutions, family offices and corporates and invests across multiple asset classes and geographies through co-mingled funds, customized portfolios and separately managed accounts (SMAs).

Lunate has also established Alterra, the world's largest private climate investment vehicle, and Axight, focused on mid-market opportunities in Asia Pacific. In addition to its private markets platform, Lunate also has a range of conventional and thematic exchange traded funds (ETFs), defined benefit solutions through Ghaf Benefits, and wealth management services.

Expensive but promising

Within the Asia-Pacific region and broader emerging markets, India constitutes an important area of investment, Maasry said. Its appeal extends beyond immediate valuations to strong long-term growth prospects. "While Indian equities look relatively expensive compared to global peers on a valuation-to-growth basis, other Asian markets have de-rated, with potential downside risks to their earnings estimates. Despite India's rich valuations, we continue to find compelling investment opportunities," he said.

He said while north Asia has benefited significantly from the AI and semiconductor boom, its growth has historically been more cyclical. "In private markets, where investments are less liquid and typically held for several years, entry valuations are critical. While India's asset valuations remain elevated, we believe its medium-term growth outlook is supported by strong tailwinds. The key for investors is to be disciplined about the price they pay," Maasry said.

Moreover, deepening capital markets and expanding exit avenues such as secondary sales and structured transactions signal that emerging markets, including India, are maturing, he added.

Lunate holds a stake in NSE Ltd, which went public last month in the country's second-largest initial public offering. Other key transactions include a pre-IPO investment in ICICI Prudential AMC and a stake acquisition in Advanta Enterprises alongside Alpha Wave. Through its Axight platform, Lunate also acquired a 10% stake in Aadhar Housing Finance, while its climate vehicle, Alterra, invested in renewable energy developer Evren and other firms, public filings show.

Broadly, emerging markets promise higher growth but also greater volatility, creating more dispersion in returns, Maasry said. This makes a bottom-up, case-by-case approach essential for global investment firms like Lunate, while also providing valuable diversification benefits. "Following a period of strong market performance, we remain positive but expect more modest returns ahead. With interest rates likely to stay higher for longer, we are particularly focused on funding costs and their impact on investments," he added.