The domestic economy is in good shape because there is a large and growing middle class and India’s 5.5 million-strong civil service has been given good wage increases. There are also cheap loans available for cars and housing.
India is a particularly attractive outsourcing destination because there is a well educated, skilled, English-speaking and relatively inexpensive workforce. Other positive points for shares include huge infrastructure spending, low levels of consumer debt, a very high savings ratio, a strong legal framework and high levels of corporate governance as well as a stable currency.
The stockmarket is well diversified compared with Russia and Brazil and is mainly insulated from a US and European recession. Exports represent only about 16.5 per cent of the country’s gross domestic product and only 1 per cent of exports currently go to the US.
I believe that the launch of New Star’s Indian equity fund has been very well timed, especially as Tata Asset Management’s team led by Bhupinder Sethi is highly experienced and has produced excellent past performance.
The fund consists of around 45 stocks and will concentrate on booming high-margin sectors such as infrastructure, capital goods, pharmaceuticals, technology and finance.
It will be similar to the Tata pure equity fund which has returned more than twice its benchmark since launch nine years ago. This fund is highly attractive and should be part of every big growth portfolio.