Structural Reforms to Support Long-Term Growth
Major transformation is underway in India.
Already one of the world’s fastest-expanding economies, a series of catalysts are projected to unlock even further growth in various sectors of the Indian economy, while helping to accelerate corporate earnings over the long-term. Among these factors are:
- Good monsoon rains, which have already resulted in moderating inflation;
- A pay raise for government workers intended to help boost consumption;
- Interest rate cuts by the Reserve Bank of India; and
- The implementation of a new goods and services tax, which should lead to increased government spending on infrastructure and push the GDP growth rate past 8 percent.¹
As India continues to usher in a raft of structural reforms, this creates a favourable environment for investors that are looking to add a major growth component to their portfolios via exposure to India.
Indian Markets Lift Off
The quarter ending June, 2016, saw a strong turnaround in earnings data, with around 66 percent of companies in the NSE Nifty 50 Index beating or matching estimates.² This trend is widely expected to continue in the upcoming earnings season and has already been reflected in stock-market performance.
Indian equities have been on a steady rise since February, 2016 and officially entered a bull market in July. During this time frame through to the end of September, the BSE Sensex Index has returned an impressive 22 percent, and is currently trading close to its highest level in just over a year, according to Bloomberg data.³
At around 6.7 percent, Indian sovereign bonds also offer some of the highest yields in the world, making the country’s local currency debt an attractive option for investors that are looking for income amidst negative interest rates in several developed market countries. As a comparison, 10-year Canadian and U.S. sovereign bonds both yield less than 2 percent.⁴
With domestic drivers firmly intact, and further interest rate cuts expected in the near future, Indian stocks and bonds are poised to continue on their upward trajectory.
On-the-Ground Portfolio Management… The Optimal Way to Access India
When investing in non-traditional markets such as India, active management has a strong track record compared to indexing or a passive approach. On-the-ground portfolio managers have deep insight and knowledge of the markets that they trade in, and also have the benefit of performing several onsite visits to companies that they want to purchase shares in – this ability to conduct local research is a key source of alpha generation.
Excel Funds offers Canadian investors direct access to opportunities in India, through a longstanding partnership with Mumbai-based fund manager, Birla Sun Life Asset Management Company Limited. Birla Sun Life is one of the leading fund managers in India, with approximately US$20 billion in assets under management, and is also sub-adviser of the Excel India Fund, which is the largest and longest-running India-focused mutual fund in Canada.⁵ The Excel India Fund has consistently outperformed the benchmark for the past 18 years, and is also winner of the 2015 Lipper® Fund Award for Best Fund over 3 years, in the Geographic Equity category.⁶ Investors can also gain access to Indian bonds as well as small- and mid-cap names, through the Excel India Balanced Fund and Excel New India Leaders Fund, respectively. Through these unique offerings, Canadian investors can capitalize on long-term themes in India such as domestic consumption, infrastructure investment, automotives and technology.
Why Now? The Case for Investing in India
The economic outlook for India is very promising.
GDP growth has increased from around 6.9 percent in 2013-14, to its current level of 7.6 percent.⁷ At the same time inflation has come down, forex reserves are at a record-high level, while the country has become a top investment destination for pensions, endowments and multinational corporations. Most importantly, the pro-business reforms being implemented by the Narendra Modi administration have largely been ground-breaking, and have forever changed India, putting it on a path to long-term success.
¹ Bloomberg Business, What’s The Big Deal About India’s Goods and Services Tax? Q&A, August 2, 2016. ² Bloomberg Business, India Enters Bull Market as Stimulus Bets Lift Global Equities, July 11, 2016.³ Bloomberg data, total return, in CAD terms, February 29, 2016 to September 30, 2016.⁴ Bloomberg data, accessed on October 17, 2016. Based on 10-year local sovereign bond yields.⁵ Birla Sun Life Asset Management Company Limited, latest information, as at March 31, 2016.⁶ Bloomberg data, total annualized return, in CAD terms, Excel India Fund, Series A, April 14, 1998 to September 30, 2016. Benchmark represented by BSE Sensex Index.⁷ International Monetary Fund, World Economic Outlook database, October, 2016.
To learn more about investing in India with Excel Funds click here.
Excel India Fund, Series A was awarded a 2015 Lipper Fund Award in the Geographic Equity category for the 3-year period ending July 31, 2015 out of a total of 12. The Lipper Fund Awards, granted annually, are part of the Thomson Reuters Awards for Excellence awarded by Lipper, Inc. and highlight funds that have excelled in delivering consistently strong risk-adjusted performance relative to their peers. The Lipper Fund Awards are based on the Lipper Ratings for Consistent Return, which is a risk-adjusted performance measure calculated over 36, 60 and 120 month periods. The highest 20% of funds in each category are named Lipper Leaders for Consistent Return and receive a score of 5, the next 20% receive a score of 4, the middle 20% are scored 3, the next 20% are scored 2 and the lowest 20% are scored 1. The highest Lipper Leader for Consistent Return in each category wins the Lipper Fund Award. Lipper Leader ratings change monthly. For more information, see www.lipperweb.com. Although Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper.
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. The rate of return or mathematical table shown is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the respective fund, or returns on investment of respective fund.
Statements in this document, 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 respective fund’s portfolio manager and are based on information available to the respective fund as of the date of this document. Actual results may differ materially as they are subject to a number of significant risks and uncertainties. The fund has no obligation to update or revise the forward-looking statements in this document.