Aberdeen New India Investment Trust PLC [LON:ANII] shines a light on the world’s second-most populous country and the fifth-largest economy of the world, having recently supplanted its former colonial master, Great Britain in the world rankings. As Diwali celebrations come to an end and the UK welcomes its first Indian origin Prime Minister in Rishi Sunak, a new period of optimism seems to be flowing through the country.
India has had a tough time of late and was significantly affected by the Covid-19 pandemic, life is slowly coming back to normal, and the economy is slowly, but methodically chugging back into action. However, the recovery is fragile and could still be knocked off track by the global price of fuel, a tightening of global commodities supply, which is affecting both the demand and supply aspects of the economy.
Just last week Narendra Modi’s government lowered its gross domestic product growth forecast for 2022-23 to 6.8% from 7.4%. Yet, India is growing faster than other nations in the G20 except for Saudi Arabia. In 2023-24, according to IMF, India’s GDP is likely to grow 6.1%, the highest in the G20.
This augurs well for the country, and for Aberdeen New India Investment Trust, as the IMF also noted in its rather gloomy forecast for global growth, the World Economic Outlook that more than a third of the global economy will contract in 2023, while the largest economies like the United States, European Community, and China will continue to stall.
Moving on up
It is the growth trajectory that makes India an attractive economy – moving from 11th place to 5th in a decade – as well as a domestic market of a billion consumers. Even so, the expected growth of the Indian economy over the next two years will be slower than it should be, according to a recent poll of economists by news agency Reuters, which means the future potential of the economy is even greater than it is at present. Now may be the time when the saying Chalo India most rings true.
Led by Kristy Fong and James Thom, the fund, launched in 1994, but was renamed and reconstructed in December 2004. The fund’s philosophy is: “Seeking world-class, well governed companies at the heart of India’s growth.” The fund is benchmarked against the MSCI India Index (sterling adjusted). However, the fund is unconstrained, and so performance might track away from the index.
In the latest report, the fund managers said: “Indian equities fell in September, but still outperformed the broader Asia-Pacific region as well as global emerging markets. The MSCI India index fell 2.33% [in sterling terms], as most sectors declined. Real estate, energy and utilities were among the top detractors while communication services and health care added to gains.”
Bringing the big guns
The fund’s top holdings as at 30th September 2022 were Housing Development Finance at 8.2%; Infosys (Rishi Sunak’s father-in-law’s company) at 8.2%; ICICI Bank at 8.1%; Hindustan Unilever at 6.8% and Tata Consultancy Services and Bharti Airtel, both having a 5.2% weighting. In total the top-10 stocks in the portfolio make up 55.2% of the fund.
The fund managers said: “India remains one of the fastest growing countries in the world and is expected to deliver one of the highest earnings growths this year, supported by a pro-growth budget for the 2023 fiscal year. With the Covid-19 pandemic receding, India’s economy is racing back – credit growth is accelerating, the real estate market is seeing real momentum, infrastructure is being built and consumer spending is gradually recovering. Moreover, some of the domestic headwinds, including rising inflationary pressure, appear to have moderated slightly in recent months.”
However, the fund managers did caution: “On the other hand, India’s external balances remain precarious, both in part due to relatively high energy prices – India is a net importer of oil – and as a result of falling exports. The country faces external headwinds, including a slowdown in global growth.”
However, they said that the fund’s focus on blue chip holdings should insulate the fund from any negative currents.The fund is overweight in Financials and IT services, Telecoms and Healthcare and underweight in Consumer Staples, Consumer Discretionary, Energy, Industrials and Utilities sectors. The fund has gross assets of GBP453m with ongoing charges of 1.06% and an annual management fee of 0.85% with a discount of 21.7% and 5.7% gearing with an active share of 61.5% – the ‘Active Share’ percentage is a measure used to describe what proportion of the fund’s holdings differ from the benchmark index holdings.
The Estimated Net Asset Value is 719.85 with the Latest Actual NAV being 665.39. The fund closed trading today (25th October) at 564p and has offered a year-to-date return of -9.03% and a one-year return of -8.44% with prices ranging between 476.25p and 648p over a 52-week period.
