15.04.2013

Pankaj Chopra

Portfolio Manager

Reliance Wealth Management Ltd.

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 is 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.
  • Strong employment fundamentals with a total available workforce of 750 million people and 13 million 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. Two of the country’s most important indexes, the Nifty and Sensex gauges, performed excellently last year – the former gaining 27% for the year and the latter 26%, despite predictions at the start of 2012 that low business confidence and pessimistic sentiment on the global economy would keep the Indian market in the doldrums. Meanwhile, India’s demographic development is one of its biggest economic advantages. It has one of the world’s youngest populations with a median age of 25 years while 60% of the population is of working age (between 15 and 64) and its 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 as those countries did.

 

WELCOME REFORMS

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. As Pankaj Chopra, Chief Executive Officer of Reliance Wealth Management and the Fund’s portfolio manager, explains: “India is clearly a domestic demand growth story and with low dependence on exports is expected to do better than many other markets in the Asian region, given the current global challenges for growth.” At the same time, China is aspiring to match India’s progress on reforms. Recent reforms on foreign investment in the country’s retail, insurance, pension and aviation sectors have been warmly welcomed by investors. Indeed, the USD24.2bn inflows into the market last year – the largest amount since the 2010 record of more than USD29bn – were driven in part by these reforms.

 

OUTLOOK

While challenges remain for the Indian economy, both inflation and interest rates seem to be heading lower and although there could be another year of low economic growth, the pace of expansion is likely to be faster than 2012. Meanwhile, increasing global interest in Indian equities will help push the market forward and recent reforms on foreign investment in the country’s retail, insurance, pension and aviation sectors will continue to draw more investment into the country. Consumption should remain well-supported by strong rural wage growth and government subsidies for food, fuel and fertilizers. And with households in better financial shape than corporate borrowers, demand for cars and white goods in particular should improve.

 

INVESTMENT ADVISER

The Fund’s investment adviser 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 equity portfolios as segregated mandates and delivering value to clients.

 

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.