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Strong fundamentals and a positive outlook for the economy have helped India’s stock market to scale fresh record highs in recent months. While valuations seem stretched, market experts believe there is still some steam left, bringing us to some India mutual funds that can be added to investment portfolios.
The IMF sees India’s economy growing at 5.4% in 2023 and 6.4% in 2024. Inflation has been higher than the central bank target but is showing signs of easing in 2023. The country has seen less impact of a global economic slowdown as exports do not make up the major chunk of the economy, whereas cheap oil from Russia has helped weather some of the effects of rising inflation.
Timothy Moe, Chief Asia Pacific Strategist at Goldman Sachs, recently said in a note that he expects Nifty to scale 20,000 in the next 12 months. The Nifty 50 index is currently hovering around 18,300 points, down from an all-time high of 18,887.60 it had scaled in December 2022.
Indian equities were hit by the banking crisis in the US and the persistent inflation but have since recovered some of these losses as investor sentiment improved. The Nifty 50 has risen just over 1% in 2023, as of May 12.
Although the new year brought a fresh set of problems for the Indian financial markets, the BSE Sensex was the world’s second-best performer in 2022, while the Nifty 50 was the third-best. The first one was Brazil.
On the other hand, India’s comparison with China is imminent when looking at investments in Asia. India recently surpassed China as the most populous country in the world, and while a larger population does not entail better performance of financial markets, it is a good indication of economic growth prospects. China is already dealing with an ageing population whereas the UN projects India’s population to start declining after 2047.
“We expect investments to see a turnaround and thrust the economy into sustainable growth. India will likely grow at a moderate pace of 6.0%–6.5% in FY 2023–24, as the global economy continues to struggle. Growth in the next year will likely pick up as investments kickstart the virtuous circle of job creation, income, productivity, demand, and exports supported by favorable demographics in the medium term,” as per Deloitte.
While risks persist, the macroeconomic outlook for India is improving, and the long-term growth story is still intact. This brings us to the following India mutual funds for investors eyeing the South Asian country’s stock market.
India mutual fund market
India’s mutual fund industry started in 1963, and as of April 30 has assets under management of $506 bn, a more than five-fold increase in a decade. The mutual fund sector saw its AUM double in the past five years, as per the Association of Mutual Funds in India. While this pertains to the domestic market, it indicates that the demand for investments within the country is rising. Regulated foreign portfolio investors can invest in Indian mutual funds barring thematic funds.
The case for India mutual fund is made stronger by the recent rise in India’s weight in the MSCI Emerging Markets index. As of April 28, India had a 13.69% weightage on the MSCI index, slipping to the third spot after certain Adani firms were dropped by the index aggregator.
Goldman Sachs India Equity Portfolio
Launched in 2008, the Goldman Sachs India Equity Portfolio is invested in listed companies in India and is actively managed. The fund has ongoing charges of 2.50%, and an initial sales charge of 4%, and is managed but the vast team of analysts at Goldman. As of May 12, 2023, the fund had total assets under management of $1.89 bn.
Since its inception, the fund has given 66.40% returns but has declined 4.59% year-to-date, as of March 2023. The fund is benchmarked against the MSCI India IMI index and has over 50% allocation for large caps.
The fund has a total of 98 holdings, with the top five being — ICICI Bank (7.2%), Infosys (7%), Axis Bank (4.4%), Reliance Industries (4.2%), and HDFC Bank (4.1%).*
Sector-wise, the fund is largely invested in financials (27.3%), followed by IT (14.5%), consumer discretionary (11.8%), materials (11% and consumer staples (9.3%).*
Matthews India Fund
Launched in 2011, the Matthews India Fund has total assets under management of $21.39m, as of April 30. The fund is benchmarked against the S&P Bombay Stock Exchange 100 Index.
The India Fund has a gross expense ratio of 1.80% and is managed by Matthews Asia’s Portfolio Managers Peeyush Mittal and Sharat Shroff, who collectively have over two decades of investment experience.
Matthews India Fund has fallen 1.92% year-to-date, whereas the benchmark index was down 3.59%. Since inception the fund has given average annual total returns of 5.61%.
The top five holdings of the fund are — HDFC Bank (8.2%), ICICI Bank (7.2%), Shriram Finance (5.2%), Infosys (4.7%), and Neuland Laboratories (4.2%).**
The top allocations sector wise are financials (37.4%), consumer discretionary (12.5%), IT (11.4%), industrials (11.3%) and healthcare (10.3%), among others. Nearly 50% of the fund’s allocation is for mega cap stocks that have market capitalization over $25 bn.**
Amundi Funds SBI FM India Equity
Launched in 2006, Amundi’s SBI FM India Equity fund has total assets under management of $501.52m, as of May 15, 2023. The fund invests in Indian equities and is benchmarked against the MSCI India 10/40 index.
The fund has ongoing charges of 2.08%, an entry charge of up to 4.50%, and also charges an annual performance fee, as of May 15.
The fund has risen 0.04% year-to-date, whereas the benchmark index has fallen 2.43%. Since its inception, the fund has given 216.75% returns.**
The top five holdings of the fund are — ICICI Bank (9.09%), HDFC Bank (7.51%), Infosys (7.12%), Larsen & Toubro (6.86%), and Axis Bank (4.40%).
Sector-wise, the fund is largely invested in financials (31.75%), followed by consumer discretionary (14.92%), industrials (14.64%), materials (12.11%), and IT (9.12%).
* As of March 30, 2023
** As of April 30, 2023
Editor’s Note – All data for Share Class A.
