FMG (EU) India Fund gained +19.0% in the 1st Quarter of 2017

After a disappointing 2016, India was by far the best market for the first three months of this year.

When India delivered a very gutsy statement in November of 2016 by voiding the 500 and 1000 INR (Indian Rupee) notes, the short-term effect of the disruptive nature of taking out 86% of the cash that was circulating in the country negatively impacted various business segments. However, we saw the restored confidence and replacement notes (new money) come into full force during the quarter and the stock market responded extremely positive.

The next big event that the strong and confident leadership in India will implement is the Goods and Service Tax (GST).  Today, taxes on goods and services are collected both centrally and locally whereas the pending GST would cover manufacturing, sale and consumption of goods and services throughout India in one system.  The inherent synergies are expected to be material, which should translate into higher GDP.

The latest guidance for this year’s growth number indicates GDP of 7.1%, which is extremely strong for the 7th largest economy in the world.  We remain highly confident in a simplified and more efficient India in the future as over 200 million new bank accounts have been created in the last few years and over 800 million SIM cards have been issued.  Smart phones are growing 70% per year and helps India leapfrog old systems and take advantage of the technology super-highway.  This should all translate into efficiency and growth and when we match this with fair valuations with improved corporate earnings outlook, we remain bullish on India.

Source: Bloomberg, UTI