Taking a balanced approach to investing in India is a recipe for success for investors seeking diversified exposure to the country’s top-performing equity and high-yielding bond markets.
Currently, the Indian equity market is among the best performing emerging markets while its corporate and sovereign bond markets offer yields that are among the highest in the world; and approximately 4 times the yield of Government of Canada 10-year bonds.
To put the performance of India’s bond and equity markets in perspective, the S&P BSE Sensex Index is up 23.7% for year-to-date period ending May 30, 2017[i], while the S&P BSE Bond Index is up 7.7% over the same period.[ii]
Incidentally, the performance of both the equity and bond markets are forecasted to climb higher. The equity markets are expected to benefit from higher earnings growth. In an interview with The Economic Times, Jonathan Garner of Morgan Staley notes that this is the best back-to-back earnings growth environment we have had since 2006-07. “We are bullish on India, see Sensex at 34,000 in June ‘18.” [iii]
In another interview with The Economic Times, Chetan Ahya, also of Morgan Stanley, notes that “From 2018, India will be firing on all cylinders.”[iv]
In the meantime, the performance of the Indian bond markets is expected to improve on the back of record low inflation. At 2.18% in May, inflation is at its lowest level since India started publishing an economy-wide consumer price index in 2012, due in part to a decline in food prices.[v]
Inflation is now well below the Reserve Bank of India's medium-term target of 4 percent, and at the lower end of its CPI projection of 2 percent-3.5 percent in the first half of the fiscal year, triggering speculation that the Reserve Bank of India may cut interest rates at its next meeting in August[vi] – sending bond prices higher.
With both the equity and bond markets forecasted to deliver strong returns, investing in a balanced fund that leverages the performance of both asset classes is therefore a good, lower-risk solution for investors seeking to capitalize on the combined strengths of the Indian equities and bonds.
The Excel India Balanced Fund – the only fund of its type in Canada– allows investors to capture the potential upside of both asset classes in a single fund. Its unique, actively managed, diversified portfolio comprises primarily of 60% Indian publicly-listed equities and 40% Indian investment grade corporate bonds, with the aim of generating income as well as capital appreciation.
The Fund is managed by Birla Sun Life Asset Management Ltd., one of the largest and most respected asset managers in India, which currently also manages Excel’s top-performing Excel India Fund.
[i] Excel Funds Management Inc.
Excel Funds are offered by Excel Fund Management Inc. and distributed in Canada through authorized dealers.
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