JPMorgan Indian Investment Trust has announced its interim results for the six-months ended 31 March 2016. During the period, the company provided an NAV total return of 2.2%, ahead of its MSCI India Index benchmark, which returned 1.8%. The share price total return was 0.6%, which reflects a widening of the discount over the six months from 12.3% to 13.7% at the period end (the managers comment that this is against the background of widening discounts across the investment trust sector generally).
In terms of performance attribution, the managers say that the overweight position in domestic cyclicals, such as financials and building materials, contributed positively while the underweight position in selected telecom stocks, lower quality banks and healthcare stocks also helped relative performance. However, they also say that the underweight position in global cyclicals detracted from relative performance in what they describe as an exceptionally volatile period for commodities. The overweight position in industrials also detracted from performance. The managers believe that the prolonged delay in the recovery of the investment cycle hurt this sector. Other than these general trends, there is limited commentary on individual stocks contributions, or portfolio activity, ad so we are unable to comment on these here.
In terms of outlook, the managers say that, in the near term, volatility may well continue as the global macro backdrop remains uncertain with deflation being a clear and present danger in many parts of the world. They say that the slowdown in China continues to be a concern and that these factors could lead to further outflows from risky assets, which could be a headwind for emerging markets as an asset class. While the Indian economy is more domestically driven and less dependent on external demand than in most emerging markets, the managers think that the inter-linkages with the financial markets are much more pronounced. From a domestic perspective, the upcoming monsoon season will be crucial for sentiment due to the impact on the rural economy and monetary policy. The managers comment that, whilst weather patterns are inherently unpredictable, a couple of forecasts have predicted a normal season. The managers say that their longer term outlook on India remains positive, driven by their belief that growth, in both GDP and earnings, is set for a cyclical recovery with falling interest rates likely to be a catalyst, though they also say that it is admittedly taking much longer than expected. The managers advise that, whilst headline valuations are around long term averages, they believe that value is beginning to emerge from a bottom-up perspective.
JPMorgan Indian provides modest NAV outperformance : JII