With the announcement by India’s election commissioners that the country’s 2024 general election will take place in phased ballots from April 19th to June 1st, the spotlight has been turned on the world’s largest democracy. James Burns lead manager of the Evelyn Partners Active Managed Portfolio Service (MPS) considers how investors can tap into India’s growth story.
James Burns comments:
“India’s economy has been growing rapidly in recent years aided by meaningful structural reforms introduced by Narendra Modi’s ruling Hindu nationalist BJP government and significant infrastructure investment. With Modi the clear frontrunner to win a third five-year term as prime minister, this should result in the longest period of stable government since Independence and investors will be hoping for a continuation of business friendly policies.
“Modi’s BJP party enters the parliamentary election campaign with India the fastest-growing major economy in the world, with GDP growth having hit 8.4% in the last quarter of 2023. Modi himself enjoys strong approval ratings. In last month’s Morning Consult Global Leader Approval Rating Tracker, Modi was at 78% – making him the most popular leader in the world. The BJP will be hoping for an uplift on the 353 of the 543 seats the party and its allies won in the 2019 general elections.
“For investors, the case for India is compelling on both a longer and medium term view. For example, India is well positioned to benefit from foreign companies seeking to reduce over-reliance on China as a manufacturing centre, an example of which is Apple which is seeking to move iPhone production to India. Under Modi, investment in infrastructure has increased and incentives have been provided to attract electronics manufacturers to help India compete on the international market.
“But India is much more than a low cost manufacturing story, the growth of domestic consumption is a really exciting theme, powered by a fast growing young population and rapidly expanding middle class (approximately a third of the population is estimated to be between 20 and 33 years). This will help drive economic growth for decades. According to analysis published by BMI, the country’s consumer market will become the third largest in the world by 2027 fuelled by rising numbers of middle to high-income households.”
The Evelyn Partners Active MPS team holds exposure to India in a number of funds. James Burns comments on some of its holdings:
· Goldman Sachs India Equity fund: “The fund targets capital growth over the longer term by investing in Indian companies and currently has 114 holdings, with its biggest sector exposure being Financials (23.9%), Consumer Discretionary (17.9%), Information Technology (12.3%) and Industrials (9.5%). Hiren Dasani was appointed co-manager for the fund in 2013 and in 2017 became lead manager. Top 10 holdings include banks ICICI and Axis, software company Infosys, and Zomato which provides a technology platform for restaurants to connect with customers and delivery partners.”
· Fidelity Asia fund: “The fund is managed by Teera Chanpongsang, who has been a portfolio manager at Fidelity since 1998. It invests at least 70% in equities (and their related securities) of companies throughout Asia (excluding Japan) but the manager is not restricted in terms of size, industry, or geographical split. The fund currently has over 22% invested in Indian equities, including three Indian banks: HDFC, ICICI and Axis.”
· Schroder Asian Total Return Investment Company: “Managers King Fuei Lee and Robin Parbrook have led the trust since 2013.The portfolio currently has 12.8% exposure to India and its top 10 holdings include two Indian banks: HDFC and ICICI.”
· Utilico Emerging Markets Trust: “This UK listed fund is focused on global infrastructure and utilities megatrends in emerging markets. Managed by Charles Jillings, it
currently has a 9.8% allocation to India, with exposure to a number of Indian companies operating in the energy transition space including India Grid Trust, Gujarat State Petronet and Power Grid Corporation of India.”
