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This is a financial promotion for The First Sentier India Strategy. This information is for professional clients only in the EEA and elsewhere where lawful. Investing involves certain risks including:

  • The value of investments and any income from them may go down as well as up and are not guaranteed. Investors may get back significantly less than the original amount invested.
  • Currency risk: the Fund invests in assets which are denominated in other currencies; changes in exchange rates will affect the value of the Fund and could create losses. Currency control decisions made by governments could affect the value of the Fund's investments and could cause the Fund to defer or suspend redemptions of its shares. 
  • Indian subcontinent risk: although India has seen rapid economic and structural development, investing there may still involve increased risks of political and governmental intervention, potentially limitations on the allocation of the Fund's capital, and legal, regulatory, economic and other risks including greater liquidity risk, restrictions on investment or transfer of assets, failed/delayed settlement and difficulties valuing securities. 
  • Single country / specific region risk: investing in a single country or specific region may be riskier than investing in a number of different countries or regions. Investing in a larger number of countries or regions helps spread risk.
  • Smaller companies risk: Investments in smaller companies may be riskier and more difficult to buy and sell than investments in larger companies.

For details of the firms issuing this information and any funds referred to, please see Terms and Conditions and Important Information.

For a full description of the terms of investment and the risks please see the Prospectus and Key Investor Information Document for each Fund. 

If you are in any doubt as to the suitability of our funds for your investment needs, please seek investment advice.

India Monthly Manager Views

Change is the only constant

We have written about the spate of Initial Public Offerings (IPOs) in India and our reasons for staying away from them, for the most part. This time, we want to talk about why new listings are important to keep the market vibrant and to keep the entrepreneurial spirit in the country alive.

In the last 18 months or so, India has witnessed more than 120 IPOs and follow-on offerings. This may seem like a maniacal pace, and indeed it is. However, this statistic absolutely pales in comparison to the five-year period from March 1992 to March 1997, during which an astounding 4,712 listings occurred — equivalent to nearly three IPOs every single day for five years!1

For reference, there are around 6,000 companies listed in India today.2 So, a not insignificant number of companies that we currently invest in owe their existence to the IPO boom in the ‘90s. For example, in 1992 a dynamic financial institution backed by the Asian Development Bank, called the Industrial Credit and Investment Corporation of India, listed in India. Over the years, this institution has morphed into ICICI Bank, currently the largest holding in our India strategy. Other top holdings which listed during that period are HDFC Bank (March 1995), Infosys (February 1993) and Godrej Industries (April 1993). Therefore, it would not surprise us if a few from the current crop of fresh listings become large investments for us in the future, despite our current misgivings about elevated valuations.

Over the past 20 years, nearly a thousand companies have listed in India and with them several sectors of the economy — hitherto inaccessible to public market participants — have opened up. Examples include sectors such as Insurance, Telecom, Modern Retail, Fast Food, Diagnostics, E-commerce, Food Delivery and several more, which did not exist in the Indian stock market 20 years ago. There are two positive effects of such a trend. Firstly, the stock market is then truly a barometer of the economy, rather than a crude imitation. We have seen, firsthand, that some emerging markets become stale, with a handful of sectors dominating the business landscape and investor returns. Secondly, the entrepreneurial drive to succeed is amplified when one witnesses the new cohort of managers/owners listing their businesses. Indeed, in top business schools and colleges across India, there is a welcome shift in mindset among students wherein entrepreneurship is respected, whereas just a decade ago, only the odd student would dare to step out of the well-established route of getting into a top corporate job.

Another change in the Indian stock market was the government’s decision, in 2018, to re-impose long-term capital gains taxes on investors. This might be old news but, as we point out, the effects are only being felt now. For one thing, as prudent operators, while we pay actuals, we do account for the tax on an accrued basis, providing for a sum that would become due were we to sell all our holdings tomorrow. This effectively depresses the Net Asset Value (NAV) of the strategy and as we come up to the 4th anniversary of this rule change, in a strong rising market, it has become noticeable as a substantial drag when one looks at relative numbers.

Plus ça change!

1 Source: Prime Database. https://www.primedatabase.com/pub_demo.asp

2 Source: Bloomberg

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*Company data retrieved from company annual reports or other such investor reports. Financial metrics and valuations are from FactSet and Bloomberg. As at 31 October 2021 or otherwise noted.

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This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situation or needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should conduct your own due diligence and consider your individual investment needs, objectives and financial situation and read the relevant offering documents for details including the risk factors disclosure. Any person who acts upon, or changes their investment position in reliance on, the information contained in these materials does so entirely at their own risk.

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Past performance is not indicative of future performance. All investment involves risks and the value of investments and the income from them may go down as well as up and you may not get back your original investment. Actual outcomes or results may differ materially from those discussed. Readers must not place undue reliance on forward-looking statements as there is no certainty that conditions current at the time of publication will continue.

References to specific securities (if any) are included for the purpose of illustration only and should not be construed as a recommendation to buy or sell the same. Any securities referenced may or may not form part of the holdings of First Sentier Investors' portfolios at a certain point in time, and the holdings may change over time.

References to comparative benchmarks or indices (if any) are for illustrative and comparison purposes only, may not be available for direct investment, are unmanaged, assume reinvestment of income, and have limitations when used for comparison or other purposes because they may have volatility, credit, or other material characteristics (such as number and types of securities) that are different from the funds managed by First Sentier Investors.

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Not all First Sentier Investors products are available in all jurisdictions.

This material is neither directed at nor intended to be accessed by persons resident in, or citizens of any country, or types or categories of individual where to allow such access would be unlawful or where it would require any registration, filing, application for any licence or approval or other steps to be taken by First Sentier Investors in order to comply with local laws or regulatory requirements in such country.

This material is intended for ‘professional clients’ (as defined by the UK Financial Conduct Authority, or under MiFID II), ‘wholesale clients’ (as defined under the Corporations Act 2001 (Cth) or Financial Markets Conduct Act 2013 (New Zealand) and ‘professional’ and ‘institutional’ investors as may be defined in the jurisdiction in which the material is received, including Hong Kong, Singapore and the United States, and should not be relied upon by or be passed to other persons.

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References to ‘we’, ‘us’ or ‘our’ are references to First Sentier Investors, a global asset management business which is ultimately owned by Mitsubishi UFJ Financial Group (MUFG). Certain of our investment teams operate under the trading names FSSA Investment Managers, Stewart Investors and Realindex Investments, all of which are part of the First Sentier Investors group.

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