Important Note Click to maximise
Important Note I have read and agree, click to minimise

This is a financial promotion for The First Sentier India Strategy. This information is for professional clients only in the UK and 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 strategy invests in assets which are denominated in other currencies; changes in exchange rates will affect the value of the strategy and could create losses. Currency control decisions made by governments could affect the value of the strategy's investments and could cause the strategy 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 strategy'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 strategies 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 strategy. 

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

200505278-001

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

Related insights

GettyImages-1325342016-min.jpg
Vinay Agarwal, Director of FSSA Investment Managers, has more than 20 years of investment experience. The team has spent decades building relationships with high-quality owners and managers in India and have identified, some of the best compounding growth opportunities in the world. Read on as he shares the experiences and some of his reflections over the past decades.
  • Article
  • 5 mins
india-castle-hero.png
Whilst valuations of many small and mid-cap companies are questionably high, we are being prudent; and we believe there are a number of reasons why India’s premium is well justified.
  • Article
  • 3 mins
india-castle-hero.png
The FSSA team - Vinay Agarwal, Sreevardhan Agarwal and Shivika Srimal – has always found great investment opportunities in the India market, and believe that the pool of investable companies is growing every year. In this note, they share how the investment themes in India have evolved and what excites them as they look ahead to the future.
  • Video
  • 15 mins

*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.

Important Information

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.

We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication but the information contained in the material may be subject to change thereafter without notice. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material.

To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to be true and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of everyone at First Sentier Investors.

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.

Selling restrictions

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.

The First Sentier Investors funds referenced in these materials are not registered for sale in the United States and this document is not an offer for sale of funds to US persons (as such term is used in Regulation S promulgated under the 1933 Act). Fund-specific information has been provided to illustrate First Sentier Investors’ expertise in the strategy. Differences between fund-specific constraints or fees and those of a similarly managed mandate would affect performance results.

About First Sentier Investors

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.

This material may not be copied or reproduced in whole or in part, and in any form or by any means circulated without the prior written consent ofFirst Sentier Investors.

We communicate and conduct business through different legal entities in different locations. This material is communicated in:[1]

• Australia and New Zealand by First Sentier Investors (Australia) IM Limited, authorised and regulated in Australia by the Australian Securities and Investments Commission (AFSL 289017; ABN 89 114 194311)

• European Economic Area by First Sentier Investors (Ireland) Limited, authorised and regulated in Ireland by the Central Bank of Ireland (CBI reg no. C182306; reg office 70 Sir John Rogerson’s Quay, Dublin 2, Ireland; reg company no. 629188)

• Hong Kong by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong

• Singapore by First Sentier Investors (Singapore) (reg company no. 196900420D) and has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors (registration number 53236800B) is a business division of First Sentier Investors (Singapore).

• Japan by First Sentier Investors (Japan) Limited, authorised and regulated by the Financial Service Agency (Director of Kanto Local Finance Bureau (Registered Financial Institutions) No.2611)

• United Kingdom by First Sentier Investors (UK) Funds Limited, authorised and regulated by the Financial Conduct Authority (reg. no. 2294743; reg office Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB)

• United States by First Sentier Investors (US) LLC, authorised and regulated by the Securities Exchange Commission (RIA 801-93167).

• Other jurisdictions, where this document may lawfully be issued, by First Sentier Investors International IM Limited, authorised and regulated in the UK by the Financial Conduct Authority (registration number 122512; registered office 23 St. Andrew Square, Edinburgh, EH2 1BB number SC079063).

To the extent permitted by law, MUFG and its subsidiaries are not liable for any loss or damage as a result of reliance on any statement or information contained in this document. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment products referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.

© First Sentier Investors Group

1 If the materials will be made available in other locations, seek advice from Regulatory Compliance.