FMG (EU) India Opportunity Fund gained +2.9% in the 3rd Quarter of 2017
India has been among the best-performing markets globally with stocks up over 20% so far in 2017, helped by a weakening USD, modest inflation, historically attractive interest rates and a stable currency.
What we have been waiting for years in terms of local Indians starting to buy their own stock market is happening. Just in the month of September alone, more than US$ 3 billion of new money was invested in Indian equity mutual funds.
The stock market is considered fairly priced with an estimated P/E of around 20. For a country approaching 1.3 billion people, it is impressive that, according to the latest forecast from the World Bank, we should expect GDP growth of 7% for 2017-18.
On the political side, the popular and hard-driving Prime Minister Narendra Modi, the so-called Modi-effect, has not fainted and the election in 2019 is by most observers considered in favour of Mr Modi, as the opposition is weak and the real election may be out in 2024. It helps create a stable setting for further reforms and economic growth.
A milestone reform was recently implemented; the GST (goods and service tax). It is essentially a “one country – one tax” which will simplify the complex tax code seen to-date among India’s 29 states and 7 unions. The benefits of this major implementation should be seen from early 2018 and onwards.
Outlook: Markets look good from a medium-term perspective as macro factors are falling in place, coupled with strong consistent inflows from domestic Indian investors. Worth noting that equity markets have lagged nominal GDP growth for several years now.