The Analyst: Don't run away from the Indian tiger
Saturday 14 June 2008
India is the second-largest country in the world in terms of population (behind only China) and the seventh-largest in terms of land mass. It has 36 cities with populations of more than a million people in each, and is forecast to be the most populous country in the world by 2050.
It is becoming increasingly wealthy and has the largest English-speaking population in the world with a huge educated middle class. It is clearly a massive investment opportunity, so you might wonder why there are hardly any Indian funds available.
But this is gradually being addressed, and one new launch is the New Star Indian Equity Fund. New Star has taken a slightly unusual route by in effect sub-contracting the management of the fund to Tata Asset Management. Tata is a huge Indian conglomerate – many of you will know it from its purchases of Corus (formerly British Steel) and more recently Jaguar and Land Rover. It has operations in 54 countries across six continents, and accounts for an amazing 3 per cent of the entire Indian economy and 5 per cent of its exports. As you might imagine from these statistics, Tata is the largest private employer in India.
The investment division, Tata Asset Management, is one of the fastest-growing investment houses in India, currently running approximately $7bn (£3.6bn) for more than two million investors. The division already manages a number of funds for Indian nationals with, I must say, very impressive track records.
The managers believe they have an investment edge through the sheer depth of research they do within the Indian market. They look to exploit opportunities created by a fast-growing economy without losing sight of stock valuations. This discipline is important, because it is easy to get carried away in such situations, to overpay drastically and then suffer a big disappointment.
Tata's 18-strong investment team sift through some 4,000 stocks on the Indian market and bring this list down to a manageable universe of about 400 companies. From this, a focused portfolio of 35 to 40 shares will be selected. They tend to invest in larger companies (that is, those valued above $1bn). The New Star fund will be about 75 per cent-invested in this area.
When I visited Tata's offices in Mumbai, I was struck by the team's extremely high standards of professionalism and ethics. In my opinion, they would put most Western companies to shame. Risk management is high on the agenda, but this will not be a closet indexer of the Indian stock market; Tata will take calculated risks in an effort to outperform the market.
Without doubt, India has huge potential. It has a superb demographic profile – a large part of the population are young people – which over the long term means that it could be even more successful than China. However, there are problems – and infrastructure and power supplies are two very obvious ones.
Remarkably for such a large country, India should be self-sufficient in food. However, poor infrastructure means that 25 per cent of foodstuffs rot before they get to their final destination. A massive road-building programme is under way across the nation, with about 7,300 kilometres under construction and due for completion in the next year. Furthermore, power generation capacity needs to be increased – India is producing 9 per cent less electricity than current demand, and 78 million homes don't have electricity.
Finally, inflation is rearing its ugly head. Fortunately, the Reserve Bank of India has been far more proactive than most emerging-market banks and has raised interest rates in response. However, inflation could still present a significant risk in future.
It is vital that investors remember that India is neither a one-way bet, nor a short-term one. Volatility should be expected, and at times it will be extreme, but true long-term investors with cash to spare should probably view sharp falls as an opportunity to top up their investment. India also makes a good area for regular savings as, during periods when the market is low, you can gradually pick up units at a lower price.
In my opinion, New Star has scored an impressive coup by getting Tata to manage this fund. Not many people in the world have much experience of investing in the Indian stock market, but Tata are the kind of group you'd back to succeed. It is imperative that an Indian investment be held with at least a 10-year time horizon – short-term traders should beware.
The New Star Indian Equity Fund is currently in an offer period; you can buy it for a fixed price of 500p per unit until 27 June.
Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent
Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk
The best deals on personal loans: Peer-to-peer providers are more competitive for smaller sums
China stock market: My portfolio's in pain, but it was never for the financially faint-hearted
China stock collapse: Five things you need to know about 'Black Monday'
Questions of Cash: 'Our dividends seem to have disappeared when TSB was bought and then born again'
Bargain Hunter: Groupon has a great deal at Wimbledon Greyhound Stadium
- 1 The difference between a migrant and refugee, in one sentence
- 2 Miley Cyrus calls out hypocrisy of women’s nipples being taboo
- 3 Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
- 4 iPhone 5c to be discontinued, no iPhone 6c to replace it
- 5 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Iain Duncan Smith calls for urgent ESA overhaul as part of drive to cut down welfare costs
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...
Day In a Page
In a sandbanks location, moments from the beach, this three-bedroom apartment has a large open-plan living area and a south-west facing balcony.
This four-bedroom home has an annexe accessed from the side of the house, with potential for improvement and conversion subject to the necessary permissions.
In the heart of the hamlet of Wardley, this five-bedroom period home offers countryside views and a stylish interior, with original features and open fireplaces.
Offering countryside views and landscaped gardens, this three-bedroom Grade II-listed lodge has a spacious conservatory and a large cellar that could serve as a workshop.
Set in approximately 1.5 acres, this four-bedroom home comes with a second, detached property that's currently used as an annexe.
In the hamlet of Newchurch, this former parish church is now a four-bedroom home complete with clock tower and eyrie.
Offering scenic views from a large balcony and sun terrace, this four-bedroom home has a wraparound garden and a heated swimming pool.
Offering views across the Humber and East Yorkshire Wolds from a glass panelled balcony, this four-bedroom barn-style home befits a life of leisure.
This four-bedroom home offers versatile accommodation with annexe potential; features include a hot tub, sauna and Norwegian BBQ hut.
Well-located for schools, colleges and the town centre, this contemporary thatched cottage offers flexible living space with six bedrooms.
Built in 1907, this four-bedroom Edwardian period home has been refurbished by the current owners, retaining many original period features.
Surrounded by landscaped gardens, this five-bedroom home offers living space across three floors.
This lovely country home in Burnham Market is currently run as a popular holiday cottage, with five en suite bedrooms and colourful gardens.
This three-bedroom 17th-century former village bakery is just a few miles from the East Sussex coast.
Set on a landscaped plot, this light and airy four-bedroom home comes with a log burner in the lounge, a fitted kitchen and an open-plan ground-floor layout.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Built on a former chapel site, this impressive four-bedroom home boasts balconies, stunning views and contemporary modern living.
This three-bedroom house is situated in a quiet mews and set over three floors. Features include glazed staircases and high ceilings.
A period townhouse set over four floors, this five-bedroom home was built in the 18th Century and retains many original features.
With five bedrooms, this spacious home offers beautiful gardens and modern interiors - set within the popular market town of Bingley.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This first-floor flat comes with two bedrooms, an impressive open-plan reception room and two lovely roof terraces.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Moored at Taggs Island and reached via a pretty garden, this two-bedroom houseboat has a vaulted reception room and skylit garden studio - currently a beauty salon.
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
A contemporary house spread over three storeys, this three-bedroom detached home has large sliding doors that open out to the River Quaggy.
Moored in Chelsea's Cheyne Walk, this houseboat offers two double bedrooms and a teak deck that's ideal for al-fresco dining.
This former village bakery, dating back to the 17th century, is now a three-bedroom detached home just a few miles from the East Sussex coast.
On the picturesque Isle of Man, this four-bedroom character home has a ground-floor shop that's currently run as a newsagents and a flat that would make an ideal holiday let.
In a new collection of flats, this first-floor two-bedroom apartment offers ample entertaining space and a prime view of Furze Green from a private balcony.
This three-bedroom stone-built cottage currently trades as the village store with a restaurant in the annexe and family accommodation on the upper floors.
Previously two semi-detached properties, this five-bedroom home is spread over three floors with a large breakfast kitchen, orangery, office and gym on the second floor.
This five-bedroom home enjoys countryside views over the Blyth estuary to Southwold, offering flexible living space with a ground-floor annexe - ideal for use as a holiday let.
Close to the market town of Eye, this four-bedroom detached home offers a double-height living room which takes the place of the original, 19th-century, chapel nave.
Dating back to the 19th century, this four-bedroom home needs modernising. Spanning three storeys, the red-brick house has a fireplace, a small terrace and a cellar.
Just outside of Cambridge, this single-storey home offers three double bedrooms, a living room with vaulted timber ceiling and ladder steps that lead to a mezzanine study area.
This six-bedroom Georgian home is on three floors with open fireplaces, a two oven Aga, an annexe, and cottage gardens with outbuildings and a car barn.
A former coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, an attached office, kennels and an outbuilding that's currently used as a gym.
Located beside an impressive Victorian viaduct, this four-bedroom home has an open-plan living area that is glazed on two sides, with skylights and high ceilings.
A former furniture workshop, this three-bedroom home has high ceilings and painted brick walls, in a village setting only fifteen miles from the coast.
This five-bedroom stone townhouse features a pine staircase and an Inglenuk fireplace, double doors from the lounge give access to an enclosed courtyard.
This five-bedroom, detached home blends traditional and modern design; the sleek kitchen features a gas hob and oven set within an exposed chimney breast.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B or countryside retreat, subject to change of use permissions.
This Grade II-listed three-bedroom home is situated on a private road, just a short walk from the sandy beaches of Frinton-on-Sea.
Less than five miles from Malmesbury, this four-bedroom cottage comes with equestrian facilities and gardens that extend to approximately three acres.
Spanning three storeys, this late-Victorian five-bedroom farmhouse is a spacious family home with a modern interior and B&B potential.
With an original church arch, this triplex one-bedroom church conversion has a light, spacious, feel and comes with a secure off-street parking space.