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India’s growth momentum lifts equity funds

For funds invested in Indian equities, 2015 is shaping out to be a good year as the country shows that it is able to reward investors with its resilient domestic consumer base.

A survey of 71 India equity-focused funds using FE Analytics databases shows that every single fund has managed to bring in positive returns for the observed trailing three-year period.

The poorest performer, Standard Life Investments Indian Equities, has managed a trailing three-year return of 1.84%, while the top five performing funds are bringing in returns of 68.2%-90.2% for the same period.

Other regional funds fared poorly in comparison, according to data from FE Analytics, which showed that only one Malaysia focused equity fund was able to generate positive returns for the same period and only two Thai focused equity funds clocked in positive returns.

A snapshot of the top five performing Indian-equity focused funds:

While mutual funds in India are facing headwinds in the form of distribution pressure and regulatory uncertainty, the country is supported by strong macroeconomic fundamentals and managers are taking note. In a disclosure this week, Aberdeen Asset Management’s senior manager, Adrian Lim, revealed that the firm topped up their holding in IT giant Infosys.

“The IT consulting and software services group continues to be a market leader and boasts a net-cash balance sheet. It is well-placed to enjoy solid growth in operating margins when the sector recovers,” Lim said.

Sanjiv Duggal, head of Asian and Indian equities at HSBC Global Asset Management, is also optimistic about India’s technology sector. In an interview with Fund Selector Asia last month, he said that he is overweight in government-linked and technology sectors in India. He noted that the financial and energy sectors are also worth paying attention to as their earnings have kept pace with their stock prices.

India’s growth to overtake China

In its 2016 outlook released this week, PineBridge Investments predicted that for the first time since 1999, India would grow faster than China.

“The divergence between India and China is stunning. India’s growth is projected to accelerate in the coming years while China’s is expected to slow,” PineBridge’s chief economist, Markus Schomer, said.

PineBridge projected that India’s GDP will hit 7.7% next year, up from an expectation of 7.3% this year.

Ajay Marwaha, Sun Global Investment’s director of investments, recently told Fund Selector Asia that while India will remain as an investment-led country in the short term, it has the potential to transform into a consumption-led economy, just like China, over the long term.

Invesco is a firm that shares the same view as Marwaha. It noted in a disclosure released earlier this month that select stock-picking combined a high-conviction approach works for the high-growth emerging Indian market.

“Our portfolio is more balanced today reflecting the bottom-up conviction on specific companies rather than sector considerations. Currently our preferred areas based on valuations and growth are financials and consumer discretionary,” the firm noted.

Part of the Mark Allen Group.