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The real indicators.
THE REAL PICTURE

India’s biggest fund manager watches soap and detergent sales, not GDP, while investing

By Madhura Karnik

A country’s GDP growth is a key indicator of the state of its economy, but India’s biggest fund manager has no time for it.

For, S Naren, executive director and chief investment officer at ICICI Prudential Asset Management, has other things on mind.

“I’m not an economist, so I don’t understand the GDP numbers,” Naren, who handles assets worth $29 billion (Rs1.95 lakh crore), told Bloomberg in an interview last week. “I would use things like coal and power demand, two-wheeler sales and volume growth in areas like toothpaste, soaps, and detergents. These areas can see huge growth, leave aside the GDP numbers.”

India’s GDP computation, revised in Jan. 2015, has confused some of the country’s top minds, including its central banker Raghuram Rajan and the government’s chief economic advisor, Arvind Subramanian.

This change boosted GDP growth from 4.7% to 6.9% for 2013-14.

There have been concerns over the accuracy of these numbers. The on-ground evidence, it is suggested, paints an entirely different picture: job growth has been at its lowest in seven years, consumption in rural areas—a key indicator of growth—is at a multi-year low due to two consecutive drought years.

In fact, Ruchir Sharma, head of emerging markets and global macro at Morgan Stanley Investment Management, said in February last year that the GDP growth was a “bad joke.”

The master investor

Others, too, have begun looking at alternative indicators to get a sense of what is exactly happening. The Reserve Bank of India, for instance, now tracks sales of two-wheelers and cars, rail freight, and rural consumer goods sales, to complement the GDP estimates.

In his interview with Bloomberg, Naren explained how his stock-picking strategy also changes according to global developments.

“If oil spikes or the monsoon turns bad, we would be pro-exporters. We will go underweight on highly-leveraged companies and turn cautious on financials,” he said.

An Indian Institute of Technology-Madras and Indian Institute of Management-Calcutta alumnus, 50-year-old Naren’s stock-picks are among the most watched by equity investors and traders alike.

And going by his strategy, soaps and toothpastes, too, might now be closely tracked by others.