THE MONEY MAKING EXPERT
Indian government so intent on supporting ‘free enterprise that it makes Margaret Thatcher’s backing of small businesses in the early 1990s modest by comparison’.
In contrast, the Chinese state is increasingly restricting the ability of leading companies – operating in areas such as educational support and the internet – to go about their day-to-day businesses. ‘Disorderly capitalism,’ the state has said, will no longer be tolerated.
He adds: ‘In India, there is a sense of unbridled optimism. Companies are extremely positive about Modi and everyone is in growth mode.’
Thompson, who also runs the Liontrust India fund, says his modus operandi as a fund manager is to identify emerging market ‘leaders’ – companies that are leading the way in their respective sectors. Two Indian businesses that wear this cap comfortably, he says, are bank ICICI (it also has a successful UK operation) and conglomerate Reliance Industries, which is a leader in the manufacturing of solar panels.
The country’s commitment to green energy excites Charles Jillings, manager of investment trust Utilico Emerging Markets. Like Hardenberg and Thompson, he welcomes the ‘quiet economic revolution’ that Modi has overseen.
‘Before Modi, India was a dysfunctional economy and heavily based on agriculture,’ he says. ‘Now, the mix of tax reforms and cuts that he has introduced are feeding through to economic growth. From an investment point of view, there are shortterm challenges, but I’m optimistic in the medium to long term.’ Jillings’
current focus is on companies involved in improving India’s energy infrastructure – whether it is through building solar energy farms (Power Grid Corporation of India) or extending and improving the transmission network (India Grid Trust). ‘The government understands that energy security is key to delivering economic growth,’ he says.
HOW YOU CAN INVEST WITHOUT TOO MUCH RISK
ALL the investment experts agree that the economic case for investing in India is compelling: a young workforce, a growing middle class with money to spend and growing corporate profits.
And the stock market performance numbers look good. For example, the MSCI India Index, comprising 85 per cent of all listed Indian companies, posted a positive return of nearly 9 per cent in the year to the end of May. This compares with a 14 per cent fall in the broader MSCI Emerging Markets Index.
But it’s not without risk. Like all emerging markets, the Indian stock market is volatile. While the MSCI India Index has delivered investors average annual returns of 13 per cent over the past ten years, there have been years of near market carnage. In 2008, for example, the index fell by more than 56 per cent as the country was caught up in the global financial crisis.
‘Investors do need to take a longterm view,’ cautions Laith Khalaf, head of investment analysis at wealth manager AJ Bell. ‘They must buckle up for a bumpy ride because this is a risky area of the world. When investor sentiment is poor, money tends to flow out of the market pretty quickly, which can lead to sliding share prices.’
Like other experts, Khalaf believes that a more pragmatic approach is to invest in a broader Asia Pacific or emerging markets fund with exposure to India. For example, the Asia Pacific Leaders Sustainability fund, managed by Stewart Investors, has almost half of its assets in India, while Fidelity Asia has 20 per cent. Over the past five years, they have generated returns of 36 and 28 per cent.
Investment trust Pacific Assets is liked by both Dzmitry Lipski, of wealth platform Interactive Investor, and Jason Hollands, of wealth manager Evelyn Partners. It has delivered five-year returns of 24 per cent and has 46 per cent exposure to India. Hollands also likes Aubrey Global Emerging Market Opportunities, with five-year returns of 38 per cent and more than a third of its assets in India.
There are 25 Indian funds or investment trusts run by some big investment brands such as Fidelity, Jupiter, JP Morgan and Liontrust.
The only adviser brave enough to put forward Indian fund recommendations is Hollands: investment trust Ashoka India and Goldman Sachs India Equity Portfolio.
One final bit of advice. Only invest for the long term (think more 2050 than 2030) and invest on a regular basis, preferably through a pension or Isa.