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Investment trust insider on India

Investment Trust Insider on Perpetual Income and Growth

Investment trust insider on India – James Carthew: ignore India’s polls and pick a stock picker

India is going to the polls and results from the general election will be declared on 23 May. It looks as though the National Democratic Alliance, the coalition of the BJP (Bharatiya Janata Party) and various regional parties, will be returned to power and Narendra Modi will hang on to his job as prime minister.

This is not a given however, and the uncertainty created by the elections has been a contributory factor to volatility in the Indian stock market over the past six months.

One of the BJP’s election messages is that it has contributed to the strength of the Indian economy. In July last year, when I was writing about the launch of Ashoka India Equity (AIE), I mentioned that the country’s economic growth seemed to be heading back towards 8%.

However, in recent months we have seen questions emerging over the reliability of India’s GDP statistics. A third of the companies used to sample the economy in the Ministry of Corporate Affairs Database are said to be either misclassified or non-existent.

There are more reliable indicators that suggest that the pace of growth is slowing. For example, unemployment appears to be rising and the purchasing managers index (PMI) is falling, suggesting that business confidence is shaky.

Another important consideration is the recovery in the oil price from its December lows. India is a big importer of oil, and Iran has been an important supplier in recent times. The renewed US sanctions on Iranian oil, imposed last November, allowed India to continue to import some Iranian oil up to the end of April, but now it must look elsewhere.

These are short-term factors and for me the long-term story remains intact. India, which is forecast to be the most populous country on the planet, is changing rapidly. Its middle class is growing; it is adopting new technology; urbanising with the population of towns and cities forecast to double by 2050; and starting to tackle its chronic pollution problems – some states have already banned single use plastic while by contrast the EU’s ban doesn’t take effect until 2021).

In addition to the four India-focused trusts –  read more here

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