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Indian Stocks Poised for Strong 2016

In the past year, Canadian equities were constrained by sluggish growth due to falling commodity prices, while Indian stocks outperformed.





Indian Stocks Outperform Canadian Equities by a Differential of 17.8%

Indian Stocks Outperform Canadian Equities

Source: Bloomberg data, cumulative performance for calendar year 2015 in CAD terms, as at December 31, 2015.

Indian equities returned strong gains in 2015, adding to a solid 2014 performance which saw the stock market ride the momentum of a rally which started in the run-up to the appointment of Narendra Modi as Prime Minister. The BSE Sensex Index added a whopping 41.1% in gains during 2014.1

2014 Modi Rally

2014 Modi Rally

Source: Bloomberg data, total performance return in CAD terms, December 31, 2013 through December 31, 2014.

Prime Minister Modi’s administration has focused on implementing several policy reforms which have helped spur growth, including a landmark goods and services tax (GST) bill, at a recommended rate of 17-18%2, set to come into effect in the first half of 2016. His ‘Make in India’ initiative has seen him travel across the globe to promote India as a top investment destination, boosting foreign direct investment (FDI) to a level of US$5billion.3 Meanwhile, foreign institutional investor (FII) mutual fund flows came in at a whopping US$8.8billion for the first 11 months of 2015, compared to US$2.9billion in 2008.4 As a net importer of crude oil, India has also benefitted from lower energy prices, whereas net exporters like Canada have suffered.

Stock-market performance is typically a leading indicator of where the economy is heading. 2015 marked the year that India gained the moniker of the world’s ‘fastest-growing economy’, usurping China. Over this time frame China has shifted from being a leader in manufacturing and exports, to a consumption-driven model. The Indian economy grew at a robust pace of 7.4% year-on-year in the three months ending September, 2015. Although China’s 6.9% rate of expansion over the same time frame is nothing to scoff at.5 Both economies offer remarkable growth stories and unique investment opportunities and have outperformed Canadian equities over the long-term.

Indian and Chinese Equities beat Canadian Stocks Over the Long-term

Indian and Chinese Equities beat Canadian Stocks Over the Long-term

Bloomberg data, annualized total performance in CAD terms, December 31, 2000 through December 31, 2015.

Excel Funds has long been a proponent of investing in emerging markets, having launched the Excel India Fund, the longest-running and largest mutual fund in Canada, focused solely on investing in India. At Excel Funds, our investment philosophy is one that chases growth in the emerging world and we view India as a true bright spot, as such, we are overweight India across several of our actively managed investment strategies. In 2015, the Excel India Fund returned 14.6%, outpacing the MSCI India Index and BSE Sensex Index.6

Excel India Fund Generates Strong Returns for Investors

Excel India Fund Generates Strong Returns for Investors

Source: Bloomberg data, annualized total performance for calendar year 2015 in CAD terms, as at December 31, 2015.

Since inception through December 31, 2015, the Excel India Fund has an annual compound return of 11.6% versus 5.3% for the TSX Index, meaning, C$10,000 invested in the Excel India Fund and the TSX Composite Index, would have grown to C$69,764 and C$25,157, respectively – a sizable difference of C$44,607 or almost 3 times the return.7

Growth of C$10,000 Invested

Growth of C$10,000 Invested

Source: Bloomberg data, annualized total performance for calendar year 2015 in CAD terms, as at December 31, 2015.

With a leading GDP expansion rate, supported by sound government reforms; a demographic dividend which shows a rapidly expanding and educated middle class; and lower commodity prices globally, India is well positioned for strong growth in 2016.

1 Bloomberg data, total performance return in CAD terms, December 31, 2013 through December 31, 2014.
2 Reuters, Prospects for India’s landmark tax reform brighten as panel backs lower rate, December 4, 2015.
3 Reserve Bank of India, Trading Economics data accessed on December 29, 2015.
4 National Securities Depository Limited, Business Today, Long on India: FIIs are still upbeat on India despite the bearish sentiment on Dalal Street, December 20, 2015.
5 Bloomberg data, accessed on December 29, 2015.
6 Bloomberg data, total annualized performance return in CAD terms, as at December 31, 2015.
7 Bloomberg data, total performance return in CAD terms, April 17, 1998 through December 31, 2015.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. All statements in this update, other than statements of historical fact, and including statements regarding the future economic effects of events, are “forward-looking statements”. These forward-looking statements reflect the current beliefs of the Fund’s portfolio manager and are based on information available to the Fund as of the date of this update. Actual results may differ materially as they are subject to a number of significant risks and uncertainties. Excel Funds has no obligation to update or revise the forward-looking statements in this update.

Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.