Even as the domestic markets see a surge in small and midcap stocks today, with few stocks such as Excel Industries, HEG Ventures zooming by more than 15% intra-day, Kathryn Koch of Goldman Sachs Asset Management says that the small and midcap space is slated to continue to outperform their largecap counterparts in India. Sharing that Goldman Sachs has invested $4 billion in the small and midcap space in India, Kathryn Koch said that the house has been investing with a bias towards Indian small cap and midcap stocks. Sharing reasons for the same, Kathryn Koch, head of client portfolio management and business strategy for Goldman Sachs told ET Now that as people are not yet fully aware of the potential in the space, the inefficiency helps the firm in outperforming the benchmark.
“We are overweight the smallcap and midcap space relative to most of the major benchmarks. We’ve been able to generate outperformance in small and midcaps during rally as well as when they have been behind. Since people are not yet fully aware of the opportunities in smallcaps, we continue to have a bias towards them, as the inefficiency provides scope for alpha generation,” she told the channel.
But where does the firm see opportunity for wealth creation? “We definitely have a link to a lot of consumption and related stocks as we are most excited about the the rise of middle class story in India.” The expert shared that Goldman Sachs sees opportunity in education, healthcare and the infrastructure sectors too. “There’s a big commitment on infrastructure building in India,” Kathryn Koch observed.
According to Kathryn Koch, India continues to be one of the best destinations for capital allocation among the major emerging markets. “For foreign investors when they look at emerging markets, they’re getting a two times earnings growth at a 25%-30% discount than what’s on offer the United States equity markets. So EM at a headline level looks more attractive to the US, more earnings growth and you get to pay less for it. Within emerging markets, India is one of our favourite markets to allocate capital,” Kathryn Koch told ET Now.
In the same interview, Kathryn Koch said that one great thing about the Indian market as an equity investor, is the diversity of the market. “Our overweight position is due to positions built in more on a company by company basis,” she explained. Further, Kathryn Koch said that the house tries to avoid state-owned enterprises, and India has less state-owned enterprises than China. “So, there are many privately owned companies and great diversity across a lot of different sectors,” she said, taking stock of the Indian markets.