“India will remain an investible destination for 10 years,” he told the audience. He stressed 2 drivers that will keep the short and medium-term outlook buoyant - easing of internal issues and massive reforms initiated by President Narendra Modi. India’s current account and budget deficits, approximately 5 per cent of GDP in 2013, have dropped to 0.7% and 3%, respectively. Inflation, near 14% in 2012, has eased to 2-3%, allowing interest rate cuts and the improved environment for the economy and the stock market. Modi secures majority supports from the Congress, leading to political stability unseen in decades and policy continuity. Meanwhile, Modi’s 10-year vision to turn India into a global economic power adds positive impacts to the economy. The newly-introduced Goods and Services Tax in particular brings about a unified system in the 28-state country and is expected to boost GDP by 1 percentage point through cheaper logistics cost and higher consumption. Modi also envisions mobile phones for all Indians, the improvement of infrastructure (electricity, railways and roads), and legal reforms which have so far led to the abolishment of more than 1,000 laws.

 

According to Mr. Agarwal, the fund manager, his team consisting of 20 generalists in different areas has regular meetings to debate every investment idea. The fund’s portfolio leans towards mid-sized companies with corporate governance, right business models and bright outlook. A bottom-up stock selection approach is being employed to get the right business. In focus are companies with strong brand and pricing power, which allows them to maintain steady and high margins as well as returns on capital across business cycles. The emphasis is also placed on the owners who must be ambitious yet conservative in expanding business. Acting like long-term partners, the fund is ready to put a brake on any company in the portfolio should it embark on unjustified plans. The fund’s 10-year cumulative return is 234.26%, compared to MSCI India’s 40.47%. “Our investment philosophy is getting the right business and right people, to find long-term conservative business with pricing power,” he said.
Source: Team structure from First State Investments | First State Investments as of 31 Aug 17. The performance shown belongs to the performance of the master fund, so it is not complied to AIMC’s standard | Please study fund features, performance, and risk before investing. Past performance is not an indicative of future performance.

“Growth will be driven by increasing penetration of products like shampoos, soaps and cars as compared to other emerging markets,” he said, expecting greater investment in infrastructure chiefly electrification to change the way people generate income and consume. More than 95% of the assets are now invested in Indian companies and the rest in promising companies in neighboring countries – Sri Lanka, Pakistan and Bangladesh.

Source: First State Investments as at 30 June 2017.