An update on Indian Equities

Kenneth Akintewe,Head of Asian sovereign debt, Fixed Income – Asia

India, like many other countries around the world, has not been immune to Covid-19. Conditions are tough, with new measures recently having been implemented across the country which will impact the economy further. The country is on a nationwide lockdown which is disruptive to business, with many plants shut down across various sectors. The Reserve Bank of India unleashed a comprehensive package including a larger-than-expected rate cut, measures to boost system liquidity and regulatory forbearance to help address credit issues that are likely to occur with lockdown-driven business disruption. This should help to cushion pressure from the disruption, but is not enough to drive a growth recovery.

We expect a further slowdown in the economy across the board. Consumption spending will be impacted, especially those related to more discretionary spending like travel and entertainment. Business productivity will take a hit as well for both domestic players, exporters and outsourcing companies given that this is a global issue. Oil price staying lower for longer is a relief to India and should allow for more monetary easing by the central bank.

But where do we go from here? We believe that the quality companies in which we invest, with strong balance sheets and strong management teams, should be able to weather the storm better than most. We have been more defensive in our positioning and continue to take a cautious stance, expecting more market volatility in the near term. However, we do see value emerging in certain pockets as there has been indiscriminate selling across the board. Where we see good quality stocks unduly punished, we have opportunistically topped up more by drawing down gearing and we have room to do more should the markets continue to fall.

The India Fund (IFN) remains focused on identifying companies with deep business moats, clear earnings levers and prudent capital management which we believe should deliver sustainable returns over time.

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Foreign securities are more volatile, harder to price and less liquid than U.S. securities. They are subject to different accounting and regulatory standards, and political and economic risks. These risks are enhanced in emerging markets countries.

Concentrating investments in the India region subjects the Fund to more volatility and greater risk of loss than geographically diverse funds.

Equity stocks of small and mid-cap companies carry greater risk, and more volatility than equity stocks of larger, more established companies.

Closed-end funds are traded on the secondary market through one of the stock exchanges. The Fund’s investment return and principal value will fluctuate so that an investor’s shares may be worth more or less than the original cost. Shares of closed-end funds may trade above (a premium) or below (a discount) the net asset value (NAV) of the fund’s portfolio. The Net Asset Value (NAV) is the value of an entity’s assets less the value of its liabilities. The Market Price is the current price at which an asset can be bought or sold. There is no assurance that the Fund will achieve its investment objective. Past performance does not guarantee future results.

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The value of investments, and the income from them, can go down as well as up and you may get back less than the amount invested.