Brazil is contending with high inflation and low growth, while Russia is suffering from a drop in oil prices and it has yet to re-join the global community. China continues to under-deliver on the economic front despite a series of bold monetary measures to stimulate growth.
While India has its own set of challenges, the country remains a compelling defensive story – especially after it showed that its economy could withstand the impact of China’s slowdown. In addition to an expanding economy and declining inflation, a newly-approved accommodative monetary policy has further boosted optimism levels among industry sources.
Early this week, Indian central bank governor Raghuram Rajan lowered the benchmark repurchase rate by half a percentage point to 6.75%. He also relaxed curbs on foreign ownership of its debt, giving global funds increased access to bonds.
Standard Life Investments noted this week that the inventory cycle in India has hit a trough and that the cycle is poised for a turnaround – suggesting a pick-up in production and a stronger outlook toward the end of the year.
Describing his view of India, Mark Burgess, Columbia Threadneedle Investments’ CIO, told Fund Selector Asia that the region is a self-help story with a domestic consumer growth angle. While he remains cautious in the emerging markets bloc, his fund is overweight on India.
“The India picture is completely different to China. The two are moving almost in opposite directions”
Like Burgess, Peter Doherty, investment manager for Arbuthnot Latham is overweight India equities. Doherty told Fund Selector Asia that while the Indian market is expensive, the region has potential for real earnings.
“Reforms are not at the pace the market would like them to be, but we believe they will progress and earnings will get revised upwards,” Doherty said.
“The India picture is completely different to China. The two are moving almost in opposite directions,” Doherty added.
Top performing India equity funds (36-month period):
Source: FE Analytics