Indian equity funds struggle to make returns
Indian equity funds have performed the worst out of the Asia Pacific single country sector, representing four of the five bottom funds, according to data.
According to FE Analytics, within the Australian Core Strategies universe, there were seven Indian equity funds of which none had managed to make a return so far this year.
While all funds were on an upwards trajectory, no fund has managed to recover losses from the global sell-off induced by the COVID-19 sell-off.
Ellerston India was the top-performing Indian fund at a loss of 5% since the start of 2020 to 30 September, 2020. It was also the only fund to beat the FTSE India index that lost 5.42%.
The Ellerston fund was followed by Fidelity India (-5.78%), Fiducian India (-9.18%), ETFS Reliance India NIFTY 50 ETF (-11.67%), India Avenue Equity Wholesale (-12.08%), India Avenue Equity Retail (-12.38%), and Jaipur AM Master (-13.55%).
Performance of Indian equity funds v index since the start of 2020 to 30 September 2020
FE Analytics
No doubt the country was one of the hardest hit by the COVID-19 pandemic with a total 8,364,086 people in the country being diagnosed with the virus at the time of writing, according to its health ministry. This was second only to the US at 9,463,782, according to the Centers for Disease Control and Prevention.
However, in recent months, new cases in India had plateaued and mortality rates have been trending lower.
The Ellerston fund’s manager, Mary Manning, said the market had been pricing in an improvement in the COVID-19 situation in India despite rising daily cases.
“We have been concerned about the disconnect between economic reality in India and the performance of the equity markets over the past couple of months,” she said.
“Indeed, the Indian market is up 12% over the past three months and is the best performing market in Asia over this period. We are pleased to report that the COVID-19 situation in India has finally started to improve over the past month, with the number of daily cases in India trending down since the middle of September.
“On the economic front, India continues to reopen its economy in phases, with schools and cinemas allowed to reopen over the past week. Economic activity continues to improve with manufacturing product manufacturing index rising to 56.8 in September vs 52.0 in August. This was the highest print since January 2012.”
The Ellerston fund has its largest sector holdings in financials (20.1%), information technology (18.8%), energy (18.7%), consumer staples (11.3%), and materials (9%).
Fidelity said its short-term outlook for Indian equities remained weak given the uncertainty over the duration and scope of the COVID-19 outbreak in the country.
“An improvement in the COVID-19 situation, normalisation in economic activity and further government support for the economy will be required to sustain an improvement in economic activity,” its latest factsheet said.
“We think government stimulus, particularly increased infrastructure spending, together with agriculture, manufacturing and labour reforms will play an extremely important role in supporting an economic recovery. In addition, the financial system is in good shape and should recover from the crisis.”
Over the longer term, the Ellerston fund was still the top performer at 19.68% over the three years to 30 September, 2020.
This was followed by Fidelity India at 19.34%, and Jaipur AM Master at 8.7%. The India Avenue Equity Wholesale, India Avenue Equity Retail, and Fiducian India funds all lost returns at 0.23%, 1.65%, and 5.2% respectively.
The FTSE India index was at 15.09% for the same time period.
Performance of Indian equity funds v index over the three years to 30 September 2020
Source: FE Analytics
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