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

The world's largest Indian equity investor, HSBC's Sanjiv Duggal, has been putting money back into the market, saying investors should take a fresh look at the country.

 
'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.

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5 comments so far. Why not have your say?

gravedigger

Jun 27, 2012 at 22:25

Buy India? Corruption, bureaucracy, mismanagement and lack of transparency. Not so much an Emerging Market as a Submerging Cesspit.

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Pike Bishop

Jun 27, 2012 at 23:55

Have to agree with the gravedigger, investment in India, a travesty. Better to leave your money in your wallet.

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Swiss Gnome

Jun 28, 2012 at 05:42

So what's different about India to Russia, China or south Asia, & American emerging markets with corruption, nothing. But have a look into the demographics over the next two generations, a growing domestic economy with economic growth based on relatively low cost highly educated and skills qualified population: lead then with caution and good research and the future is bright.

But as ever keeping you money in your wallet as an option when we watch and listen to the fiscal and inflationary moths munch away at it.

Maybe worth looking at Harry Dent's forecasts on world demographics, an economist who recons it's not Bernake, or King who control the way things are and will be but Homer Simpson.

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gravedigger

Jun 28, 2012 at 23:37

Gnome. You are correct. Little difference between India and China, Russia etc. In China with no established rule of law your entire investment can vanish in a corporate fraud with collusion from local banks, auditors and regional government. In Russia you face shakedowns from the mafia and the government (who are sometimes the same people) and jailed when you object.

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Bob saxton

Jun 30, 2012 at 18:31

Seems to me that the UK is not completely Lilly White

Bob the electrician

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