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India funds lag regional rivals

Rising international tensions and domestic policy missteps have restrained India fund performance.

The MSCI India Index has underperformed the Asia ex-Japan Index by 10 percentage points since Narendra Modi and his ruling Bharatiya Janata Party (BJP) were swept to power four-and-a-half years ago on a wave of domestic support for his reform agenda.

The index’s 21.72% return and the India equity fund category average return of 25.17% are both higher than the MSCI Emerging Markets index (16.75%). But both have significantly underperformed the MSCI China Index which, despite its wide fluctuations during the past five years, has posted a 54.22% cumulative return since May 2014.

Emerging market investors have spent months anxiously monitoring sluggish economic data out of China, and seeking reassuring policy responses.

Perhaps they should be more concerned about India, its regional rival for power, influence and investment.

Now, Modi and his BJP are facing a difficult contest in the national elections scheduled for April and May, while tensions with Pakistan have escalated after a suicide bombing against Indian troops in the disputed Kashmir region this month.

BJP’s loss of three large Indian states last December shortly after Reserve Bank of India Governor Urjit Patel quit shocked investors. Foreign investors had initially applauded Modi’s pro-business stance, which included a resolution to cut red-tape and stamp out corruption.

But, India’s economic growth slowed in the wake of Modi abrupt ban on high denominated currency notes in 2016 and a confusing new tax structure that bewildered business owners.

More recently, farmers  protested on the streets of India’s largest cities demanding the government guarantee crop prices and suspend their debts, while unemployment has also risen.

Nevertheless, several dedicated India funds have performed well since the BJP’s 26 May 2014 electoral victory. Three funds have not only significantly outperformed the MSCI India index, but posted higher returns than the MSCI China index.

Although their sizes and mandates are different, the JP Morgan, First State and Pinebridge funds share a preference to diversify away from the main index constituents and focus on companies linked to India’s economic growth and development – from telcos to cement companies.

The small, specialist JP Morgan India Smaller Companies Fund stands out with a 72% cumulative return since Modi’s 2014 election win, yet with volatility not much higher than in index.

Top Three India Funds

Size ($)

Cumulative return %

Annualised volatility %


Information Ratio

JP Morgan India Smaller Companies






First State Indian Subcontinent






PineBridge India Equity






MSCI India Index



Source: FE Analytics. Performance 26 May 2014 to 27 February 2019. In US dollars.

Comparative performance of MSCI India Index since Narendra Modi’s May 2014 electoral victory

Source: FE Analytics. In US dollars.


Part of the Mark Allen Group.