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India Capital Growth 2018 NAV down 20% as small and mid-cap market deflates

India Capital Growth 2018 NAV down 20% as small and mid-cap market deflates – After a bumper few years following the election and reforms enacted by Prime Minister Narendra Modi, India’s stock market cooled in 2018. The impact of a more challenged macroeconomic environment and exogenous forces such as the rise in oil prices (India is a major energy importer) was felt more strongly by small and mid-cap companies. India is also preparing for a general election later in 2019. India Capital Growth (IGC) felt this impact as it reported results today for the year to December 31, 2018 with its NAV down 20% on the year, which was 5% worse than its BSE Midcap total return index.

Divergence a key theme last year

David Cornell, fund manager of IGC, added: “One of the challenges of investing in emerging markets is the speed at which things change. India is no exception. In 2017 the country was in vogue, but 2018 saw tailwinds become headwinds with uncertainty and volatility dominating investor sentiment. After a period of strong returns across the whole market, 2018 was notable for the sharp divergence between large cap stocks and others. The BSE Sensex index (the thirty largest Indian companies) was up 7.2% in rupees, while the BSE Mid Cap index was down 12.6% and the Small Cap Index fell 22.9%. The mid cap index had outperformed the Sensex over the previous four years. We are confident the strength and depth of the investment process will leave the portfolio well positioned for the long run, regardless of shifts in sentiment that occur along the way.”

2018 was the first year of net Foreign Institutional Investor (FII) outflows from Indian equities since 2011 with US$4.6bn going out compared to the previous year which saw net inflows of US$8bn.

Mid-and-small-cap listed investments in India

IGC’s investment objective is to provide long-term capital appreciation by investing (directly or indirectly) in companies based in India. The investment policy permits the company to make investments in a range of Indian equity securities and Indian equity-linked securities. The company’s investments are predominantly in listed mid-and-small-cap Indian companies.

IGC: India Capital Growth 2018 NAV down 20% as small and mid-cap market deflates

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