Mark Dampier: Savvy investors keep eyes peeled on India
Saturday 26 February 2011
I last wrote about the Jupiter India Fund in November, but an update might be worthwhile because the Indian stock market has performed particularly poorly over the past few months. Since the start of the year the fund is down around 15 per cent, although some of this is accounted for by the fall in the rupee. Global fund managers are partly to blame, cutting their weightings to emerging markets to their lowest levels since March 2009, according to a recent survey. However, India has excellent long-term potential, and in the past any sustained falls in the market have provided an outstanding buying opportunity.
The problems for India began in November with the telecoms scandal, which produced allegations of bribery and abuse of political power, with the telecoms minister being arrested. This has positive ramifications for investors in that it is a sign the Indian government won't tolerate corruption. This was only the start of the challenges.
India imports much of its oil and food has been susceptible to recent price rises. Onions, too – a staple of Indian cooking – rose four-fold because of unusually heavy rains, and this alone has been enough to cause serious unrest in the past. Avinash Vazirani, manager of Jupiter India Fund, feels the fears of inflation and interest rate hikes have been exaggerated. He points out inflation has fallen from a high of 12 per cent in the middle of last year to about 8 per cent now. Food price inflation has been exacerbated by infrastructure deficiencies. Roads and railways are improving, but some 18 million tonnes of grain was left to rot because it couldn't be transported in time.
Gradually, India will address these issues. Mr Vazirani says that food inflation is not necessarily bad for the country as a whole as the majority of Indians live and work in the rural community and stand to benefit from price rises. Rural wages have improved markedly since last year, far in excess of inflation, and this is leading to a much higher consumption of goods and services. Interest rates have risen seven times since October 2009 to the present 7.2 per cent. Mr Vazirani believes they will rise by only another 0.5 per cent – less than most are anticipating. If he is right the market could rally once it is perceived interest rates have peaked, and the forthcoming budget may be a catalyst to show that India's financial problems are not as bad as investors believe. Mr Vazirani also highlights the considerable impact biometric cards will have as they are rolled out, and he expects 100,000 a day to be being issued by June. This could improve government finances, enabling taxation and benefits to be targeted more precisely.
He hasn't been this positive on the prospects of individual companies for a long time. In terms of valuations, the market is on a price-to-earnings ratio of about 14 times March 2012 earnings – a more expensive rating than other emerging markets but still reasonable, given the make-up of India's economy and a bias towards the IT and consumer sectors. Many Indian companies are good value relative to their Western counterparts, despite serving a young, vibrant population that is becoming wealthier. So keep your nerve with the Indian market. Further falls cannot be ruled out but the correction is providing a good opportunity to top up.
Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit www.h-l.co.uk/independent
- 1 Michelle Obama highlights harsh restrictions faced by Saudi women after meeting King Salman without wearing a headscarf
- 2 Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
- 3 Kim Kardashian on Bruce Jenner's 'story': 'We support him no matter what, and I think when the time is right, he'll talk'
- 4 Amal Clooney gives excellent response to fashion question at European Court of Human Rights
- 5 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
9 reasons Greece's experiment with the radical left is doomed to failure
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
Greece elections: Syriza and EU on collision course after election win for left-wing party
British Muslim school children suffering a backlash of abuse following Paris attacks
Have we reached 'peak food'? Shortages loom as global production rates slow
British grandmother Lindsay Sandiford faces execution by firing squad in Indonesia
iJobs Money & Business
£13000 per annum: Recruitment Genius: This Pension Specialist was established ...
£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...
£25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...
Competitive salary & benefits!: MBDA UK Ltd: MBDA UK LTD Indirect Procurement...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village