Indian equities had a strong forth quarter with gains of 20%+ on the back of ‘feeling better’ from receeding covid numbers at about 20,000 per day at the last days of December vs 100,000 in September.  India went out extremely hard when covid first hit, perhaps the most stringent corona lockdown globally where all shops, restaurants, factories got closed, traffic disappeared from the roads along with a cancellation of all flights and trains and closing of religious structures and confined 1.3 billion people to their homes and India recorded its highest unemployment number in its history!  Now more than 4 million vaccine shots have been given and a reminder here to you that India produces more than half the world’s vaccines across categories!  Covid aside, India recorded its highest ever monthly inflows of USD7bn in November and in the process delivered a broad-based rally across the breadth of the markets.  Economic activity is approaching pre-COVID levels per and PMI recorded its highest level in over ten years as economic growth estimates are being upgraded.  Strong earnings growth from the 4th quarter have been reported to-date with 70% beating consensus of the 55% of companies that have reported so far, especially from the IT sector, as expected.  Foreign investors added almost $20 billion of fresh money to the market during the quarter.

From the ground in India we hear that life is almost back to normal if we go by the traffic on the roads. But airports are at 70%, hotels and retail at 60% or so and schools just reopening in some states for older kids. The ‘experts’ on CNBC are talking of a “raging multi-year bull market” that is coming! The recent budget has sparked a lot of optimism about a return of capex on Infrastructure and industrial capacities. There is a high likelihood that a decade of under-investment will begin to turnaround next year. FY 22 earnings growth is expected to be over 30%.  A reminder that India’s debt to GDP level stands at 68%, far lower than its peers. The Production-Linked Incentive (PLI) scheme, which covers 13 sectors in all, was announced during the quarter. What this means is new industrial policy in India and will serve as the catalyst for large domestic and overseas investments into manufacturing and create a significant number of jobs and may be a major driver of GDP growth and investment opportunities for investors in the years to come.  Savings in 2020 went up dramatically and accumulated funds now stand ready to be released into a reactivating Indian economy.

Domicile: Malta
Source: Bloomberg LP, Unifi, IAF, ICF