28.04.2011

 

 

Dhawal Mehta

Portfolio Manager

Reliance Asset Management (Singapore) Pte. Ltd.

One of the world’s ten largest economies, Asia’s second largest, and with a population of more than one billion, India should be on every investor’s radar. A country that is changing quickly, India’s dynamic growth is underlined by impressive economic figures including rapidly rising GDP and strong stock market performance. The WIOF India Performance Fund allows investors to benefit from a fund driven by a country which has great untapped potential and a market offering extended investment opportunities in the Asian region. It is a fund that should not be missing from any well-diversified portfolio.

 

A GROWTH STORY

Indian history is rich in commerce and trade and large international companies have always been present in India. But it was only following a raft of reforms in the 1990s that the free market truly took off in India as excessive regulation and protectionism was replaced and markets opened up to a growing flow of foreign investors.  Growth has accelerated and a range of key factors is now driving the economy to become one of the largest in the world. As more and more global companies fix their eye on India’s potential, it is today one of the fastest-growing and strongest economies on the planet.

 

CHANGING REALITY

India has often been portrayed as a country facing major issues such as poverty, poor infrastructure, power and water shortages, corruption and stifling bureaucracy. But the reality is that the country is changing, and not least economically. Infrastructure is being improved. For example, the world’s sixth largest aircraft terminal has been built in Delhi and highways are changing road travel across modern India. Huge investments are expected and the government is planning to spend over USD1.3tn in the next seven years (FY2011-17) on infrastructure. Meanwhile, other problems are being solved. Corruption is being tackled and politics is changing as voters are turning more and more to parties pursuing development policies.  India is also one of the fastest growing developing countries in the world with young and vibrant demographics and the growing wealth of the population and rising consumption bodes well for the future of the economy. Progressive reforms are quickly improving the economic environment and investors can take advantage of a large, liquid, vibrant and well-regulated capital market.

 

GROWTH POTENTIAL

Crucially, indicators show how the country’s economy is taking off. Just a small selection shows the progress being made:

  • Real GDP has grown rapidly over the last decade and continues to grow
  • On the stock market, investments even during market peaks have generated good returns in the long run
  • Savings-investment ratios are rising and by 2020 GDP is predicted to reach USD6tn
  • Earnings growth for FY2012 is expected at 18-20% y-o-y
  • GDP Growth for FY2012 is expected at 8–8.5%

 

Real GDP – average % change

 

COMPARATIVE ADVANTAGE

India also fares well in comparison to other emerging market economies. Economic indicators for debt, GDP growth rates and savings are encouraging compared to other emerging countries’ economies while India’s equity market offers greater stability because of its lower dependence on commodities.

 

Equity market composition BRICS (Brazil, Russia, India, China, South Africa) Lower dependence on commodities provides stability

 

MARKET ENCOURAGEMENT

The market future is equally encouraging. Particularly in the mid-cap and small cap segment the risk-to-reward ratio is becoming more favourable and notwithstanding various macro-challenges, India's GDP is poised to grow in the 7.5-8% range for FY12 (year end: 31st March 2012). Domestic consumption and a strong revival in exports is driving this growth despite a slowdown in the infrastructure segment and interest rates in the system which have now peaked. While inflation is high, it is expected it will in future follow a gradual downward trend. The Current Account (CA) situation has also improved dramatically recently. Near-term performance of the market will depend to a significant degree on Foreign Institutional Investor (FII) flows, the numbers for which have been encouraging lately.  Against this backdrop of stable liquidity and negative news in the past, annual returns of 15-20% in the equity market can be expected.

 

INVESTMENT ADVISOR

The Fund investment advisor is Reliance Asset Management (Singapore) Pte. Ltd. (RAMS) which is a subsidiary of Reliance Capital Asset Management Limited, the largest asset management company in India in terms of assets under management.  The Portfolio Manager of the fund is Mr. Dhawal Mehta who has more than 17 years of experience in Indian equities.

 

IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WIOF is a suitable investment for them.