The best active strategies to invest in India

Investing in India is a long-term option

After rapid economic growth of 7.2% in FY 2022-2023, economic momentum has been strong in the first half of 2023. The S&P Global India Services PMI Business Activity Index for July signaled brisk expansion, continued production and new orders, while PMI- the survey for the manufacturing sector in July also showed strong expansionary conditions.

Of from tenth place in world GDP 20 years ago to fifth place today and goes on track to become the world’s third largest economy by 2028according to the IMF. This growing at the fastest rate of any major world economy and should continue with annual GDP growth of 6% in the coming years.

India is on its way to the podium

IN In April this year, India became the most populous nation in the worldwith a human capital of more than 1,400 million inhabitantsand according to the UN, almost a fifth of the world’s population aged 15-64 will be in India by 2030. With a average age 28 years, 10 years less than ChinaIndia has one significant advantage in terms of manpower.

Until 2030, an average of 10 million people each year are expected to join India’s working-age population, which currently stands at about 920 million.

Major reforms

He Prime Minister Narendra Modi bear almost 10 years in power and intends to run for a third five-year term at next year’s general election. One of the priorities of his administration has been increase the country’s productivity through a series of ambitious economic reforms and initiatives.

  • He goods and services tax launched in 2017for example replaced several indirect taxes with a single tax which led to greater tax compliance Anyway formalization of the economy.
  • The same year, a Insolvency and Bankruptcy Codewhich establishes a unified and time-bound process for insolvency resolution.
  • In 2016, it was Unified Payments Interface (UPI, for its acronym in English), a instant payment system that facilitates interbank transactions between individuals and from person to merchant: It is expected that QR codes based on digital payments will reach one billion daily transactions by 2026.

These are just a few examples of the wide range of efforts to improve the ease of doing business in India, making it an increasingly attractive location for multinationals in a wide range of industries, with inflows of foreign direct investment (FDI). , which has reached a new record of USD 85 billion in the financial year 2021-22. FDI inflows into the manufacturing sector increased by 76% year-on-year in 2021-22, reaching a level of over 21 billion. USD. India is gaining share from China when it comes to FDI in the last 12 years:

A geopolitical situation… different from China

China appears poised to challenge the world order established by the United States and its allies. In this context, terms such as “middle powers” and “geopolitical swing states” are used to describe these countries that see the opportunity to avoid taking sides and pursue their interests flexiblyIndia is considered as one of these states.

Al fstrengthen ties with Western democraciesE.g, India has benefited from “near-shoring” trends, attracting multi-million dollar investments from large companies such as Apple, Foxconn and Amazon. However, the country is still willing to buy millions of barrels of Russian oil per month and is an active member of the so-called BRICS bloc.

Despite its growing economic power, India remains a country of contrastswith a Low GDP per and one high wealth inequality. In addition, governance indicators measure progress in areas such as voting and accountability; political stability and absence of violence or terrorism; and government effectiveness, the quality of regulation, the rule of law and the control of corruption have largely moved sideways in recent years.

A lively financial market, but . . .

He The Indian capital market remains underrepresented in global indices, despite its strong growth in recent years (+43.7% in 2017, 16.15% in 2020 and +30.37% in 2022 and +11.73% so far in 2023) and due to the size of the economy , Indian equities represent only approximately 2% of the global equity universey It was only last month that JPMorgan began incorporating Indian local currency government bonds into the GBI-EM index family. most followed benchmark for emerging market debt.

India’s relevance should continue to grow as long as the gradual easing of restrictions on foreign investor participation continues. It should be considered The Indian asset market was clearly leaning towards the domestic economywhere the top 3 MSCI India sectors are: financial, technologically y discretionary consumption, which offers some decoration to other assets.

While it is true that the stock market trades at more than 20x PER and some executives comment that it is expensive, in my 20+ years in the sector I have seen India trade at high levels. But considering that it has significant growth potential, the price is justified.

One of the risks to consider is its high dependence on energy (coal, crude oil and gas), which makes it behave erratically in times of rising prices of these resources.

Best Mutual Funds in Indian Variable Income

If I have managed to arouse the interest of the investor, it is advisable to see the best investment opportunities when I get here. In this case, we bet on actively managed funds, as in an emerging market there are always smaller capitalization values ​​that are only analyzed by active managers who manage to find the true gems.

There are two leaders who stand out for their history and continued investment in the region. One of them:

  • Mirae Asset Global Investments: founded in Asia in 1997, but with presence in 14 markets in the world and with assets under management of the group exceeding 214 billion dollars. It belongs to an independent financial group. It offers a wide range of products, but in this case we will focus on a fund with high potential, such as:
    • Mirae Asset India Mid Cap Equity R USD (LU1689658778): with the focus on medium-sized companies, growth style and high momentum. The fund has the highest Morningstar rating (5 stars) and Citywire gives manager Saniel Chandrawat a rating of A. The fund’s assets total nearly $200 million, but we believe that as investors realize the benefits and opportunities of the same, they grow.

Cost Effectiveness: The fund has achieved a return of 16.6% so far this year (although it had closed in September at +20.28%), and in 2022 it fell only 0.99%, but in 2021 it returned a return of 51 .46%. The fund is consistently positioned in the best places for profitability in the short, medium and long term:

And all this is achieved with one volatility of 14.99% and a Sharpe ratio of 1.7. In addition, the fund has a lower beta than the market, which provides some protection in the event of a decline.

Briefcase: The portfolio consists of 65 positions, with the 10 largest representing 26% of total assets. The fund’s active ratio is high, 84.27, and a portfolio rotation of around 70%. The sectors preferred by the manager are: consumer discretionary (20.5% vs. 14% of peers), basic materials (10.6% vs. 7.4%), health (11.3% vs. 7.35%) and industrials 13.5% against 11%, but also financial (although in this sector with less weight than its competitors. Among the main positions, 5 from the financial sector stand out:

  • Another notable fund is Jupiter India Select Class L EUR Acc (LU0329070915), from the management company Jupiter Asset Management, with more than 35 years of history and which offers a wide range of fixed income, multi-asset, variable income and alternative strategies. Jupiter is a member part of the FTSE 250 index and has assets under management of £50.8 billion.

He bottom Jupiter India count by one assets that are about $270 million, and currently has a 3-star rating from Morningstar, but as can be seen in the previous graph, it is positioned as one of the most profitable and consistent funds over the medium to long term.

Cost Effectiveness: So far this year, the fund has returned 21.2% (although it had closed in September at +22.18%), and in 2022 it fell just 0.65%, although in 2018 it fell 20.96%. However, it achieves an annualized return after 3 years of 26.45% and 13.15% after 5 years, with an average volatility of 17.41% and a Sharpe ratio of 1.4.

Briefcase: composed of 71 variable income positions and a liquidity of around 7.5%. Its 10 largest represent 40% of total assets, with an overweight in the defensive consumer, healthcare and industrials sectors, with a clear underweight in technology, cyclicals and financials. Among the largest positions in the portfolio, Godfrey Phillips India stands out, in defensive consumption, which has increased almost 50% in the year, focusing on a growing middle class, as well as the InterGlobe Aviation industry, which achieves a profitability of 42% :

With growth prospects of 6.3% for 2024, according to the IMF, which will allow the consolidation of its prominent position in relation to the rest of the emerging Asian countries, with a strong and educated workforce, with great interest from FDI in some sectors, is the country’s potential undoubtedly. However, we must remember that the investment must fit the investor’s profile.

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