ETMarkets Smart Talk | India is ‘pricey’, not expensive: Mark Zuckerberg’s Harvard classmate Vikas Pershad on investing

Mark Zuckerberg was one of Vikas Pershad’s classmates at Harvard, but it was the institution’s multidisciplinary approach that left a deeper imprint on the investment philosophy of the Fund Manager at M&G Investments, managing about 400 billion pounds sterling in assets.

Pershad, who has been investing in Indian equities for nearly three decades, believes investors need to look beyond short-term market noise and focus on long-term earnings growth, return on equity and structural changes in the economy.

Despite India’s relatively elevated valuations, Pershad argues that the market is “pricey, not necessarily expensive” when investors are getting strong earnings growth, high ROEs and increasing formalisation in return.


He remains constructive on India’s long-term prospects, particularly in areas such as precision manufacturing, healthcare services and defence, while emphasising that active stock selection will become increasingly important as India’s investable universe expands. Edited Excerpts –

Kshitij Anand: Well, let me start off with the education. Your education at Harvard Kennedy School exposed you to policymakers, economists, and business leaders from around the world. So, how has that shaped your investment philosophy and the way you assess global markets?

Vikas Pershad: It is a wonderful place to start, and this is at the heart of my investment process: taking a long-term view and integrating multiple disciplines into investment. This is what you need to do increasingly. That has always been the case, but increasingly now, especially if you look at the opportunity set in India and the economic arc India is on. It would be applicable to any market that we would invest in, any asset class, but in Indian equities in particular, it has been very important.

Two decades ago, if I think back to my couple of years at Harvard, it is not just the people that I met along the way. Mark Zuckerberg was a classmate of mine. I met Dalai Lama there. The current Prime Minister of Singapore, Lawrence Wong, was my classmate. So, it is that, but it is also the skills that you learn and the frameworks that we have.

And when I look at India in particular, having an understanding of public policy in defence, healthcare, infrastructure investment, and education is clearly reflected in the portfolio holdings that we have. It has also kept us out of the wrong sectors. It has kept us in the right sectors. It has given us the right timeframe to understand that this India story gets a lot of attention.

The markets are open five days out of seven. We all look at the markets going up and down day to day, but really, this will continue to play out over the rest of our lifetimes, just as it has over the past two to three decades. And you bring those things together, and you get different perspectives and a different portfolio outcome as well.

So, I would say that experience was at the heart of my investment process. And I leverage everything I learned there every day when I show up to work.

Kshitij Anand: Let me also start off with the India story. FIIs have been selling India in the past 12 to 18 months, but recently the flows have sort of been coming back. How are you viewing India, and what is the percentage of AUM you have invested in India within the Asia or the EM region?

Vikas Pershad: Well, many FIIs might have left and are striving to come back. We never left. India has been an important part of our portfolio since we started allocating more capital to that market as part of our active strategies.

As you shared earlier, we are a global investment firm. We invest across asset classes. It is about 400 billion pounds sterling that we have invested around the world. About 20% of that is in equities, and nearly half of the equities exposure is now in Asia.

In Asia, it is tough to put aside one figure for the India allocation because other markets in the last couple of years have gone up so much and the rupee has weakened.

So, optically, it looks like India is only about 10% or so, plus or minus, as a percentage of the equities. It had been more, and as the rupee is stabilising, the markets are coming back, and other markets are falling, that allocation will necessarily rise.

But our commitment to India is long-standing. We never left in the past couple of years. We do have multiple strategies, I should highlight, and in our India-dedicated strategies, we have been fully deployed throughout this period.

In our Asia ex-Japan strategies and our pan-Asia strategies, India had been a larger underweight a couple of years ago, in 2024 and early 2025. We have actively reduced that in the past few months.

What is interesting, and what I would highlight, is that our team has been investing in India for close to three decades. The portfolio today looks very different from how it did three decades ago, two decades ago, or even just before COVID, and that is mirrored in the performance as well of the broader markets.

If you look at where the underperformance has been concentrated, it is in the winners of yesteryear—staples, IT services, private banks, and oil and gas names. Ten years ago, these would all have been overweights and large portfolio allocations for us.

For us today, in the top 10 holdings, there is not a private bank. A few years back, I would not have thought that that would be the case, but it is. Healthcare services are well-represented, advanced manufacturing is represented, and defence is represented. But the financial sector, in the form of NBFCs, is well-represented, not so much in banks.

And so, when I think about India over the next 10, 15, or 20 years, the nature of the benchmark is changing, the drivers of the economy are changing, and so the drivers of portfolio returns necessarily will change, and our portfolio necessarily has changed.

Kshitij Anand: And one interesting fact that you did mention is that you never left India, but many global investors sort of remain underweight India despite its strong fundamentals. What could change, let us say, over the next 12 to 24 months that could change that perspective?

Vikas Pershad: Some of it will change internally, and other factors, other variables, might change externally. Let us start with the external factors for a moment. The capital that has followed the AI trade, hardware and software, but largely hardware when it comes to Asia, if that starts finding another home, then I presume some, if not a lot, of it will find its way to India. That is number one.

Second, just internally, if the rupee starts to strengthen and the oil price stays calm. It is not so much a high oil price; it is a volatile oil price that causes issues. It is the same thing with any commodity. It is not so much a gradual rise in a commodity price or gradual weakening of a currency; it is rapid fluctuations that can cause problems for companies, for earnings growth, and then, of course, for investors as well. So, stability is key.

And I think the most important thing is that, for a quarter century, India was the best-performing market in the world, from around 2000 to late 2024, in dollar terms or in local currency terms. And why was that? It is because it had the highest earnings growth in the world, the highest ROEs in the world, sector after sector after sector.

Now what we have seen over the last 21 months or so is the largest-ever repricing of Indian equities relative to other emerging markets, relative to other developed markets, even in 40 years. Meanwhile, our view is that the long-term drivers of that growth remain intact.

Given that you see the highest economic growth rate in the world of any major economy and still a very high rate of formalisation, not only will you have a rapidly growing economy, but within that, you will have earnings shifting from the informal sector to the formal sector, which is why then corporate earnings can grow faster than the overall growth rate of the economy.

And within that, you now have a market that has 7,000 listed companies, nearly 2,000 with a market cap of over $100 million. So, if you are genuinely a long-term active manager, when you have high earnings growth rates, high ROEs, a stable currency, and a stable government, the foreigners will come back.

Meanwhile, the domestic..., we presume as a base case, should remain intact—the domestic flows that we see every month, because the growth rate is high, but also because it is not very easy for domestic investors to invest elsewhere.

So, when you put all these things together, the setup for Indian equity returns from here is constructive. What I would say also is that it does not pay to be blindly optimistic. There are many reasons to be constructive on Indian equities. There are some reasons to be cautious, but this is why, then, in a market like this, active management plays a key role. Having a long-term time horizon plays a key role.

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Kshitij Anand: Well, you did touch upon the topic of earnings and valuation. I would like to get your view on where you sort of draw the line between expensive and overvalued.

Vikas Pershad: The distinction we draw is between pricey and expensive. Often, what I hear from investors, from clients, is that India is a tricky market because the valuations are so expensive.

Our contention is that if you are paying a high price but getting a lot in return, that is not really expensive. If you are paying a price that is dislocated from long-term intrinsic value, then that is pricey. It is not expensive. What is expensive is if you pay a high price and you do not get much in return.

Now, if you look at India, historically, over the last three decades, you have the highest earnings growth rates in the world, sector after sector. You have the highest rates of formalisation, which continue to drive the high earnings growth rates, expanding margins, intelligent capital allocation, and high ROEs. You are getting a lot in return for those high prices.

There are some dynamics that are worth keeping in mind for India. The float is small for many companies because India has the highest average promoter shareholding of any market in the world. It is now more than 50%. So, the floats are small. It is difficult to get the capital outside of India. That notwithstanding, the companies are earning the capital because the ROEs are so high and the growth rates are so high.

So, what I would say, my pushback is when I get asked about India being very expensive: it is pricey, not necessarily expensive. There are expensive equities. If you think back to late 2024, early 2025, we reduced our exposure to the EMS sector to zero because our view was that there was too much in the price here.

Conversely, at around the same time, we allocated a lot more capital to the NBFC sector. Not related sectors, but our view was that one is genuinely expensive, while the other one is offering good value, and that happens again and again and again.

If you look at India this year only, if you think back to January, February, around the time the Budget was announced and we had the SaaS apocalypse, this extreme downward pressure on equities in the software space led to a lot of opportunities, and that will happen again and again.

Just one point I would also like to make—one question we also get asked about is the volatility in equity markets. In India, it was no stranger to volatility. What I would say is that if you are genuinely a long-term investor, volatility is your friend. The enemy these days is velocity because stocks are moving so fast.

If indeed you have done your homework, if indeed you have a long-term time horizon, if you are aware of what you own and what you do not want to own, then volatility will always be your friend because it is not permanent. But the velocity is our enemy, and you need to act quickly, more quickly than ever before.

Kshitij Anand: You did mention some of these sectors, and my question is largely around that only. EMS, or electronic manufacturing services, and electronics exports have sort of emerged as key investment themes in the recent past. So, how sustainable is this opportunity over the next decade, and are there any other sectoral opportunities you see that are worth looking out for over the next 10-odd years?

Vikas Pershad: Well, on the manufacturing side, this is something that we have exposure to, not so much on the EMS side, on the manufacturing services, but companies that have developed genuine capabilities in scalable precision manufacturing. We have been looking for those. We found some that are in the small-cap space, and others that are in the large-cap space. So, we are very exciting and we are very excited. It is not just because India needs electronic components to be made increasingly domestically; it is because the companies are able to do that.

It is not just a policy decision. It is because what we see on the ground are companies adept at advanced manufacturing. These are companies typically that would have started 20-30 years ago making auto parts, and they have now branched into defence and aerospace and higher and higher capability manufacturing.

When you walk some of these floors, like I did in Bangalore two weeks ago, and you start seeing semiconductor manufacturing companies from Japan, the US, and Korea as customers for these Indian companies, that is very reassuring. It is also very exciting.

Your viewers will know that India's largest import is oil. The second-largest import is electronic components, but component expenditures are growing at twice the rate of oil imports. So, this is very important fiscally for India, very important for various policies, but there is also a bottom-up opportunity that we are very excited about.

I genuinely came back excited by the opportunities I saw and the prowess I saw on the ground when I was in Bangalore last month. So, I think that this is an opportunity that will be around for a very long time.

Related to that also is healthcare services. You asked about an opportunity that would be around for years, and this is also something that is much larger in our portfolios than it is in our benchmarks. This includes healthcare services such as dialysis, diagnostics, hospitals, and different kinds of hospitals as well—women's and children's hospitals, oncology specialty hospitals, cardiac hospitals, all of that.

When you look at the shifting disease burdens in India, coupled with the rising ability to pay, and also layer on top of that the rising capabilities of these hospitals to deliver world-class healthcare, this is an opportunity that will be around for a very long time.

So, I would say precision manufacturing is one, healthcare is another, and defence is another one. There is a very long list. That is a good thing about India. There is a very long list of these opportunities.

Kshitij Anand: Well, on the other side, you track investments across the globe, and with valuations being elevated, is this a market—that is, India—where stock selection matters more than sectoral allocation?

Vikas Pershad: Yes, both matter. But yes, absolutely, stock selection matters. And I will give you a stat. If you look back from the 1st of July 1997 to the end of June 2022, so 25 years, and the reason I picked that date is because that was the handover of Hong Kong from the British to the Chinese.

Now, in those 25 years, the Hang Seng was about flat as an index in China. The Nifty in that same period was up about 18 times. And when you look back at the components of that, in a market that went up almost 20 times with the Nifty, you had many companies that delisted, went to zero, took on too much debt, and their balance sheets imploded.

In China, in an index that was flat for almost a quarter century, you had many companies that were up 30-40 times.

I often use that stat to remind myself that even in this market that has underperformed other markets for the last couple of years, where you think valuations might be high, when we look back a few years from now—not just a few days, months, or quarters, but a few years from now—active stock picking will have mattered a great deal.

And it will matter even more with every passing year, the more and more stocks that are listed. As I mentioned, there are about 7,000 listed stocks in India, nearly 2,000 with a market cap of over $100 million.

In our portfolio, we only have about 50 or so. So, from an investable universe approaching 2,000, we have invested in about 50, and that is not even 3% of the investable universe that makes its way into our portfolio.

So, doing your homework matters a lot. Having the right frameworks matters a lot. And it will matter even more with every passing year.

Kshitij Anand: Well, a lot of Indian investors have now started investing across the globe. I mean, global investing has sort of picked up. So, how should global investors think about allocating capital between India and other emerging markets such as China, Taiwan, South Korea, and other Asian markets? One of the reasons why I posed this question is because whenever we think about going beyond India, global diversification is largely towards the US only. I mean, the buck stops there. But definitely, there are other markets to explore as well. Your view on that?

Vikas Pershad: So, let us start with the two largest equity markets, the two largest economies in the world. If you look at global listed market cap, the global listed market cap of equities, it is over $100 trillion now, and more than half of that is represented by the US. I think that is too high on our time horizon, measured in years, not days, months, or quarters. China is too low. India is too low.

If you look at China's contribution to global GDP, it is very high and growing. There will be a day in our lifetimes, in our careers, when China is the largest economy in the world. If you look at the contribution of China to listed equities, it is very small. The portfolios of global managers or regional managers across Asia are still too low.

So, I would say Chinese equities look very good. We were talking about high ROEs and high earnings growth rates in India. In some ways, China is the inverse. You see low PEs. Often, you see single-digit PEs, double-digit free cash flow yields, high single-digit dividend yields, and some world-class technology managed and led by world-class operators.

So, Chinese equities are an overweight for us. India is drawing increasingly larger amounts of capital from us. And another way to look at it is, you have an entire market cap in India of about $5 trillion, plus or minus. It is about the same as the entire market cap of Nvidia or about the same as Apple.

But if you just think about where technology is headed, the future of advanced computing, the role of other companies in that, you can buy Nvidia today, or you can buy all of India. Our bet is that if you look east, you will find the winner there on the long-term horizon.

So, to answer your question, the US feels big in global portfolios and global equity markets, China feels too small, India feels too small, again, on our time horizon, and then within that, you have wonderful opportunities for alpha generation through stock picking.

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Kshitij Anand: And in fact, if India is indeed one of the world's most attractive long-term markets, which indicators would tell you that the thesis is beginning to weaken?

Vikas Pershad: Well, we look at a few things. Number one, of course, we look at the economic growth rate. We keep our eyes on inflation. We look at the stability of the currencies, the stability of bond yields. We look at equity market volatility. We look at the VIX. We look at the volatility of equity indices.

But then we look more broadly at that as well, and this is where it gets interesting, because if you look at the growth rate in GDP per capita, not just overall GDP—not the overall dollar amount or the rupee amount of GDP—but GDP per capita, we start looking there.

We look at equality or lessening inequality in the market. We look at purchasing power. Often, what we hear is 1.5 billion people in India, 3 billion eyeballs, such a large market. Actually, the purchasing power is very concentrated. It is very, very concentrated.

We look at the tax-paying base, whether that is expanding or contracting, or the rate at which it is expanding. Are people paying enough taxes to drive growth forward? Is the number of people growing? Is the amount per person growing? How is that being spent? We look at those indicators as well.

A little bit more broadly, we spend a lot of time thinking about the heatwave economy. Around the world, across Asia, but in particular in India, we are looking at rising temperatures, we are looking at healthcare indicators.

India, if you look at the disease burden, has shifted from an infectious diseases market to being one of non-communicable diseases, lifestyle diseases. The rates of cardiac disease, cancer, and other related diseases—those are all indicators that we are looking at.

So, there is no one magic number to say, "This number has crossed this threshold; it is time to go all-in on India," or "It has fallen below this threshold; time to pull back." It is complicated, but that is what makes the job challenging, interesting, and fun as well.

Kshitij Anand: Now, lastly, let us go back to your college days as well. Is there a lesson from Harvard Kennedy School that continues to sort of influence you or lead teams and make investment decisions today? And one of the things I would like to add is the fact that what we learn in college and the life that shapes today is something very different. So, is there any analogy or anecdote that you want to share with us?

Vikas Pershad: Well, rather than an anecdote, and I have to say, I love the question. It is a great place to end because I reflect on these things all the time, and I remind myself of them all the time.

I would say what I have learned through almost half a century of living, but I learned acutely so in my two years at Harvard, were the following. Number one is to think about the arcs of history in the long term. In the long term, not to focus too much on noise, but look for genuine signals.

And if you look broadly and you step back, China and India were, for centuries, the two largest economies in the world. There are some reasons to believe that the last couple of hundred years that we have seen might be an aberration. What if that is the case and China and India become again the two largest markets in the world?

It might not happen until after my career is over, when the next generation is investing, but it does seem like there is evidence that that might happen again. Just remember that when we get too caught up in the latest social media post or the latest market movement.

Number two is to think probabilistically and to accept with humility that nobody who has ever lived, and nobody who will ever live, can know what will happen tomorrow. Nobody will know that. So, we need to think probabilistically, have a range of expectations, and know that many things can happen, only one thing does, and be able to act in the face of uncertainty without complete information. That is very important.

To think about the long term, to act in the face of uncertainty with humility. And also, I would say that the important thing is to follow the evidence and make evidence-based decisions, and think things through.

And so, those are all the lessons I learned. We can keep going. There is a lot more that I learned as well.

But I think what I would also say, one thing that is very important, is to come back to this point about humility and to know that, yes, we have important jobs. We are privileged to manage other people's capital, but we make mistakes too. It is how large the mistakes are relative to the successes when we make them that matters over time, and to do that with integrity and humility. That is the most important thing.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)