01.10.2012

Pankaj Chopra

Portfolio Manager

Reliance Wealth Management Limited

Set to soon become the world’s third-largest economy and boasting long-term fundamentals underlining its status as a rising global economic superpower, there is a wealth of investment opportunities in India. Investing in Indian equity and bond markets, the WIOF India Performance Fund offers the chance to invest in one of the fastest-growing and strongest economies in the world.

 

RISING POWER

India has in the past often been portrayed as a country wracked with problems such as poverty, poor infrastructure, power and water shortages, corruption and stifling bureaucracy. But the reality is that the country has transformed in recent years, and is now a rising global economic superpower. Since reforms in the 1990s which went a long way to ridding India of excessive regulation and protectionism, growth has accelerated and a range of factors is now driving an economy which economic surveys have predicted to become the third largest in the world in purchasing power parity (PPP) terms by 2015.

The key drivers of this growth include:

  • Rising income, an expanding and increasingly affluent middle class and increasing job opportunities which are driving domestic consumption, creating a healthy domestic market filled with investment opportunities.
  • A stabilising political outlook with what is India’s strongest government for 20 years focusing increasingly on development and reforms, leading to increased FDI, development of financial markets and trillions of USD of planned infrastructure projects.
  • Positive long-term economic growth prospects with various surveys suggesting GDP growth of between 7% and 9% annually up to 2016.
  • Strong employment perspectives with a total available workforce of 750 million people and 13 million people entering India’s urban workforce each year.

 

PEER PROMINENCE

India’s growing status in the global economy is underlined by how well it compares to other emerging market economies. Economic indicators for debt, GDP growth rates and savings are encouraging while India’s equity market offers greater stability than those of some other emerging markets because of its lower dependence on commodities.

 


Indian economy to be third largest (PPP terms) by 2015

Source: IMF, RBI, Enam Research

 

India’s demographics are also one of its biggest economic advantages.  India has one of the world’s youngest populations with a median age of 25 years while 63% of the population is of working age (between 15 and 64). India’s demographic profile is similar to that of the US in the baby boomer era and China in the 1990’s, suggesting India will soon witness a huge structural spurt in consumption growth.

 

Indian working population (aged 15-64) development

Source : NCAER, RBI, ENAM Research

 

The economic slowdown in developed nations and subsequent drop in demand has also highlighted the benefits of India’s economic orientation to its domestic market. China, for instance, is now focused on a rebalancing of its growth dynamic – moving away from exports and investment and more toward an Indian-style consumer-led model. At the same time, China is aspiring to match India’s progress on reforms. India currently has scores of world-class companies, well-developed capital markets, a modern banking system, and a deeply entrenched rule of law – all areas in which some other emerging markets are lacking.

OUTLOOK

The picture for Indian markets is improving as local markets have recently bounced back as positives have resurfaced. Political changes have been seen positively by the market and with the Prime Minister himself taking charge of the Finance Ministry, key reforms are back on the agenda. Meanwhile, falling commodity prices globally have also brought some good news for India's policy makers. Due to the fall in crude oil prices and the import duty increase on gold and polished diamonds, India's import bill for the current financial year is expected to come down. The PM also appears to be set on bringing inflows back into the market and restoring investor confidence and for foreign investors, there are indications that new tax avoidance legislation is to be put on the back-burner. Meanwhile, officials have met representatives of the mutual fund industry to discuss ways to boost growth in the industry. Any such steps could revive flows to mutual funds and push stocks higher.

 

 

INVESTMENT ADVISOR

The Fund investment advisor is Reliance Wealth Management Ltd. Part of the Reliance Anil Dhirubhai Ambani Group, Reliance Wealth Management Ltd is a niche provider of investment products to institutions, investment companies and high net-worth individuals in India and overseas. Its primary focus is on creating custom made equity portfolios as segregated mandates and delivering value to clients. The team has a long history of managing international investments through the Foreign Institutional Investor route as advisors either to India-dedicated funds or to segregated mandates from institutional clients including sovereign funds.

 

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 17 December 2010 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.