The Writing Room
We aim to keep our investors up to date with regular written pieces that discuss our portfolios and our views on the opportunity-set whilst using the exercise to clarify our thoughts.
Twelve months is a short time in investing. As October brings a close to my first year as Principal Advisor to the Gateway to India Fund, I can however confirm that there has been plenty of time for investment related thinking and action. As such, this piece takes you through that journey. What a year it has been! When I started there was an air of optimism as India finally appeared to be ready for a strong turn in the corporate earnings growth cycle. This, after a few years of many structural economic reforms which necessarily involved short term ‘disruption’ to economic activity (more on this later). And then COVID-19 struck.
* House of Ocean Dial – the team’s investible universe of 135 companies
Thank you to everyone who attended Ocean Dial’s virtual conference in October. A summary of the two-day event can be downloaded here, and more detailed notes from each session can be accessed using the links in the attached document.Read PDF
Managing a small and mid-cap portfolio over the last six months has been one of the most challenging periods in my 27year career. Echoing Demonetisation, on 24th March the Indian Government made an overnight announcement to lockdown the entire country for three weeks. No advance warning. It was subsequently extended and whilst it was an audacious move (considering there were only 500 active cases at the time) it is too soon to opine on its efficacy.Read PDF
Where was India in 2010?
A decade ago a much higher nominal GDP growth rate (driven by consumption) was the norm, but an investor sitting in 2010 would have had cause to hesitate before allocating money to India. The government’s fiscal deficit was 6.5% of GDP, an 11 year high, and inflation was double digits with real interest rates negative and rising. A weak coalition government was unable to pass legislation and was facing the onset of high profile corruption scandals. 2010 also coincided with India’s worst ranking in the World Bank’s Ease of Doing Business Index at 139th out of 190 countries.Read PDF
As the global COVID-19 pandemic evolves, from an investment research perspective the key question n our mind is what are stocks in India pricing in and to what extent? This is because,in episodes of uncertainty and volatility, markets have historically been least efficient in pricing securities thereby enhancing our ability to potentially generate excess returns through our remit of investing in quality businesses at attractive valuations. The update is divided into four short sections. The first part provides some data points as context for the second part which is an outline of what expectations we believe are baked into the current prices, which will inform part three – what are we doing about it from a portfolio perspective. Finally there is an appendix which goes deeper into the methodology and assumptions we have made.Read PDF
Every year, on February 1st,the central government presents the Union Budget. It is just an account of the receipts and expenditure for the current year and the Budget for next year. Ceremoniously, market participants and the business world line up a plethora of sops and incentives that they desire from the Finance Minister. This year expectations centred on “fiscal compromise” (i.e. a higher fiscal deficit), either through measures to reignite demand (personal tax cuts) or higher spending. Expectations failed with the BSE Sensex falling1.8%(US$) over the last two days, including a special session on Saturday.Read PDF
2019 was an eventful year for India which included a national election, a liquidity crunch, a botched budget, the biggest tax reform in a generation, and an equity market characterised by divergence and volatility. It has been a testing period for many investors, Ocean Dial included, and whilst the view point that the dust has started to settle is up for debate, it is timely to have a discussion on how our research approach has evolved over this period and our broader outlook for the coming years.Read PDF
This has been a tough period for Indian equity markets, particularly in the small and mid cap space where the India Capital Growth Fund operates. The Indian equity market experienced its worst July in seventeen years. The BSE Mid Cap Index fell 7.6% in Rupee terms leaving the Index down 11.0% for this calendar year and the Fund’s NAV has commensurately fallen by 12.4%1. With August offering no respite it is timely to have an examination of the key drivers behind where we are and how we are positioning ourselves going forwards.Read PDF