The reorganisation will allow a wider range of investors to access the fund, as the minimum investment has been brought down to $10,000 from $100,000. The investment strategy and fund manager, U R Bhat, will remain the same.
In its previous form, the fund was a Mauritian fund that benefited from a double taxation treaty between India and Mauritius. In practice, this meant that the fund avoided paying tax of 10 per cent on realised gains made within 12 months. However, this was unsuitable to many investors because it was not a Ucits structure. Rearranging the fund as a subsidiary of the Melchior Selected Trust range allows the tax benefits to be retained while opening up the fund to the wider market.
Bhat follows a bottom-up stock selection process that looks at fundamentals rather than momentum. His preference for small and mid-cap stocks means that the fund is primarily focused on the domestic Indian economy, which Dalton expects to grow strongly in the next few years.
This approach contrasts with Jupiter’s recently launched Indian fund, which has a bias towards big and medium sized companies.
India is a strong investment story with growth being driven by domestic consumption and the growth in services, high levels of foreign investment and increased spending on infrastructure, not just the export market. The emergence of an educated and skilled middle class who are earning, spending and saving more is seen as another factor that will ensure growth is sustained.
India is under-researched, with modest analyst coverage, so there are many strong businesses that do not get much attention. However, the region can be volatile and stock valuations have become expensive, but some investors may feel that India’s growth potential is worth it.