India is attracting renewed interest from global investors, but Westminster Asset Management says valuations need to fall further before they take a direct position. Jonathan Schiessl said, “We are not quite there yet.” Concerns about energy costs, the rupee, and artificial intelligence uncertainty keep the firm cautious for now.
Jonathan Schiessl, Deputy Chief Investment Officer at Westminster Asset Management discusses India’s appeal for global investors, currency and oil risks, artificial intelligence (AI) uncertainty and what could trigger a bigger allocation to Indian equities.
India is attracting renewed interest from global investors after a long period of underperformance, but valuations have not fallen enough for Westminster Asset Management to take a direct India position yet, according to Jonathan Schiessl, Deputy Chief Investment Officer at Westminster Asset Management.
“We are not quite there yet,” Schiessl said, referring to direct India allocations. He said investors remain interested in the market, but concerns around commodity prices, energy costs and the currency are keeping them cautious.
India is particularly vulnerable to a rise in energy prices because it is a major crude oil importer. A weaker rupee is another concern, while a stronger US dollar could add to pressure on India and emerging markets.
Schiessl said the dollar could strengthen further as global uncertainty persists. With the US having advantages in energy and artificial intelligence (AI), while Europe faces higher energy costs and political uncertainty, he sees the dollar as “a quite a good hiding place for the time being.”
For now, Westminster prefers a broader emerging-market allocation of around 5-6% rather than a direct India position. The firm does have some direct India exposure in certain portfolios, but is not yet ready to increase it more broadly.
The AI theme is another factor influencing India's market performance. Indian software and outsourcing companies have been under pressure as investors assess the impact of AI. However, Schiessl believes these companies can eventually emerge as beneficiaries as they learn to use the technology more effectively.
“I think ultimately India will come out the other side, and Indian software companies and outsourcing companies will do well,” he said. However, he added that the market is “not quite at that stage yet.”
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Despite the sharp rise in global bond yields, Westminster is not looking to significantly reduce its equity exposure. The firm remains broadly neutral and balanced across equities, while fixed income continues to look relatively unattractive, although some parts of the longer end are beginning to look interesting.
Instead, the firm has exposure to alternatives such as commodities and hedge funds, which could benefit from higher market volatility. Schiessl said a significant market sell-off could create an opportunity for the firm to increase its direct exposure.