India: MSCI

MSCI is a brand name that is synonymous with global indices.  I had the privilege of visiting the MSCI office in Mumbai and meeting with Chandru Badrinarayanan, Executive Director and Sushil Kumar Kiradoo.  This was all arranged by our friend at MSCI in the U.S., Michael Gandy.  The MSCI India operation was impressive.  It covered the top two floors of a high rise building in Northern Mumbai.  MSCI employs over 700 people in its Mumbai office.  From my conversations with Chandru and Sushil, I really came to appreciate the valuable role that MSCI plays in helping to build the foundation for financial markets in India. 

John Lunt with Chandru Badrinarayanan and Sushil Kumar Kiradoo of MSCI

I love the technical details surrounding index construction and exposure.  You can find detailed information about the February 2015 launch of the MSCI India Domestic Indices.  These are important steps in the evolution of making Indian financial markets more investable.  Suffice it to say that we find these documents fascinating and important.

Chandru and Sushil shared some additional insights about India.  Here are a few highlights:

It is important to understand India’s history as a socialist country.  In socialist countries, people worry about security, which places a priority on owning property and gold.  As India is growing and reforming, its mindset is changing to embrace more growth and more risk-taking.  This points to investing in equities.

India has challenges, but also tremendous opportunities.  A reasonable comparison would be to think of India as “China 25 years ago.”  Improvements in infrastructure are desperately needed, but that will support growth and opportunity. 

There are many reasons to be optimistic about the long-term future of India—favorable demographics, the reform-minded government of Prime Minister Modi, and recently announced inflation targeting from the Reserve Bank of India.  All of this is conducive to long-term growth.  Chandru highlighted that India has a wide spectrum of wealth—there are many wealthy, middle class, and poor.  This provides tremendous opportunity as Indian consumers move up the wealth spectrum.

Chandru mentioned that life in India may feel chaotic to foreigners, but things always seem to move forward.  The risks are apparent, but long-term opportunities abound in India.

Special thanks to Brennan Staheli, Peter Johnson, and the Lunt Capital team for their contributions to this report.