How to profit from the game-changing reforms in India

2024 is set to be an important year for elections around the world, including in India where Narendra Modi has been president for a decade. All the evidence suggests that he will be voted in for a third term, which bodes well for his programme of reform and development that has played a key role in the country’s recent strong stock market performance.

Why invest in India?

The International Monetary Fund (IMF) expects the Indian economy to grow by 6.7% in the 12 months to the end of March and is forecasting a similar figure of 6.5% in each of the next two years¹. These are staggering numbers that reflect the increase in private consumption and investment, as well as the impressive digital public infrastructure and the rapid formalisation of the financial system.

Modi has overseen a massive improvement in the digital economy via the publicly-owned ‘India Stack’. This is a unique collection of technological layers to support the interface between government and private companies in offering tech-enabled products and services.

The development of this digital infrastructure has brought vast amounts of transactions into the formal economy and increased the tax receipts for the government in the process. Some of these revenues have been used to improve the social security and health systems, thereby boosting the disposable income and credit worthiness of large parts of the population.

A popular way to gain exposure

One option for investors keen to take advantage of these trends is the Jupiter India Fund. This actively-managed, India-focused fund has been one of this year’s best-sellers on the Fidelity Personal Investing platform.

The manager aims to provide a return, net of fees, higher than that provided by the MSCI India index over the long-term, by investing at least 70% of the assets in the shares of companies based in the country.

Strategy and portfolio

It is run by Avinash Vazirani, who looks for stocks that offer growth at a reasonable price. He has put together a diversified portfolio of 80 holdings with the top 10 accounting for 42.2% of the assets².

Around half of the £1.1bn fund is invested in large companies worth more than $10bn, with the remainder equally divided between small and mid-cap stocks. The main sector weightings are Financials 22.2%, Energy 13.9% and Industrials 13.5%.

Jupiter India top 10 holdings

1. Godfrey Phillips India
2. Indian Oil
3. HCL Technologies
4. Bharat Petroleum
5. Northern Trust Global Sterling
6. Fortis Healthcare
7. Hindustan Petroleum
8. Adani Ports & Special Economic Zone
9. State Bank of India
10. Sun Pharmaceuticals Industries Ltd 

Source: Jupiter, as at 31 January 2024

How has it performed?

Over the last 12 months the fund delivered an impressive gain of 48.1%, which was almost twice that of the benchmark. The longer term numbers also look good with a decade-long return of 319.1% versus 253.4% for MSCI India². Please remember past performance is not a reliable indicator of future returns. After such a strong period the valuations have inevitably become more stretched, so it remains to be seen if the election will help the market to continue to move higher.

How do the costs stack up?

The ongoing charges are 0.99%, which is quite reasonable for a specialist, actively managed mandate.

Who is it suitable for?

Jupiter India is a single country fund that invests in an emerging market, which means that the volatility is likely to be higher than for a more diversified alternative. This suggests that it would only be suitable for long-term, risk tolerant investors as part of a balanced portfolio.

More on Jupiter India Fund.

Past performance is not a reliable indicator of future returns

Source: FE, 15.3.19 to 15.3.24.

Source:

¹ IMF, World Economic Outlook.
² Jupiter Asset Management, data as at 31 January 2024

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This fund invests more heavily than others in smaller companies, which can carry a higher risk because their share prices may be more volatile than those of larger companies. This fund uses financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.