'Buy India' says the fund manager who’ll tell you when to sell

Sanjiv Duggal, manager of the world’s largest India fund, has been investing more of his own money into it over the past fortnight, and is urging investors to take a fresh look at Indian equities.

But Duggal, who runs the $3.78 billion (£2.4 billion) HSBC GIF Indian Equity fund (and more than $6 billion in total), is not a manager prone to just talking up his own book. Back in December 2007, and after his fund delivered a barnstorming 63% that year, he warned investors to cash out.

Anyone taking his advice would have missed a further 5% upside, but more importantly also a precipitous fall of 58% from peak to trough between January 2008 and October of the same year.

Similarly, in April 2004, prior to the general elections the following month, he told investors to sell on the back of his view that the more market-friendly incumbent government would not win a second term. On the day of the results being announced, he was proved right, and the index fell 11% in that session alone, plunging into a bear run.

‘We will tell people when we think they should top-slice their holdings or sell,’ Duggal said. ‘We are not always going to tell people to buy – we want investors to make money and for us to be seen as credible experts on India.’

Investor sentiment at a low

His bullish call comes at a time when investor sentiment towards India is at a multi-year low following a recent slew of poor economic data and heightened risk aversion more generally. 

Last month’s release of surprisingly weak first-quarter GDP numbers spooked investors even further after growth came in at 5.3%, well below the 7% the authorities expected. This prompted Capital Economics to revise down its full-year GDP forecast from 7% to 6%, but Duggal believes the severity of the slowdown is likely to spark the authorities into action.

‘Since it was so bad it will be a wake-up call for the government, who have been fairly inactive since they came to power two years ago,’ he says. ‘If you go back to last year, the reported number was 7.9% but was revised up to 9.2%, so 5.3% is roughly equivalent to 5.9% off the old base, the lowest in nine years.

‘The other wake-up call is the collapse of the rupee, which is down over 20% against both the dollar and sterling. GDP is still growing but we are hoping for more action from the authorities.

‘This is the worst sentiment has been in the 16 years I have been running the fund but I personally invested a couple of weeks ago, in Singaporean dollars. Investors should take advantage of the weak currency and the risk/reward profile is very favourable from a medium-term perspective.’ 

Growth catalysts

Despite the doom and gloom, Duggal points to several catalysts for growth if the right policies are put in place. He highlights India’s need for infrastructure development, which can act as a longer-term catalyst for growth and means of attracting more foreign direct investment.

India also has significant natural resources – including the fourth largest coal reserves in the world – but needs policies in place to improve both the mining and allocation of them.