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Jupiter's Vazirani pins hopes on India's financial revolution

Avinash Vazirani's Jupiter India fund boasts strong long-term performance but has endured a difficult year.

Jupiter's Vazirani pins hopes on India's financial revolution

High financial inclusion and a digitisation of the economy means India’s growth will continue to accelerate, says Jupiter manager Avinash Vazirani.

The manager of the £967 million Jupiter India fund is searching for ‘growth at a reasonable price’ and although India has underperformed emerging and global markets over the past year, he believes the region is still poised to deliver.

Vazirani pointed to India's outperformance of both those indices over the past 10 years. He said the past year of underperformance had been sparked by concerns prime minister Narendra Modi would not win another term, coupled with the poor shape of government finances.

However, Vazirani said there was ‘no opposition party that is strong enough to counter [Modi’s party]’ and the ‘Indian financial situation is better than people are currently forecasting’.

He said there was a ‘fundamentally positive business environment that generates good businesses… and gives us profitable investment opportunities’.

The fund has underperformed over the year to the end of March, losing 12.5%, the worst performance of all funds in Citywire's Equity - India sector.

Over the longer term, Vazirani's performance has been strong, with returns of 92% over five years and 159% over 10 that place him in the top half of the sector.

Vazirani blamed his recent underperformance on an underweight to financials, in particular HDFC Bank (HDBK.NS), which makes up 9.1% of the benchmark and has rallied ‘significantly’ making a ‘big impact on relative performance’.

Financial services group Reliance Capital (RLCP.NS), which is the fourth largest holding in the fund at 3.2%, fell on concerns about the communication business that the group owns.

Vazirani said that it had been allowed to sell its assets but that the financial services arm would ‘not have significant exposure to other group companies’ meaning it remains a ‘top class’ asset manager and insurance business.

An underweight to the IT services sector, which has rallied since the start of the year, was also a detractor.

At a stock specific level, the largest holding Hindustan Petroleum (HPCL.NS) has been a detractor. Despite reporting higher-than-expected earnings the stock is down year-to-date ‘on fears that the government may interfere on petrol and diesel pricing’, said Vazirani.

‘Our belief is the fears are unfounded and on less than eight times historic earnings, and with good growth prospects, it is still a high conviction pick,’ he said.  

Among the biggest contributors to the fund was the second largest holding Biocon (BION.NS) – a leading Indian biopharmaceutical company – which was boosted by joint ventures and the approval of its biosimilar treatments in Europe.

Low-cost carrier Indigo Airlines also boosted the fund and Vazirani predicted the ‘travel and tourism market will grow significantly’.

However, the main area of growth Vazirani is counting on is financial services. He said Indian had a ‘unique’ demographic with a young population and ‘very significant and growing internet penetration’ as well as having one of the highest levels of financial inclusion – 99% of households have access to a bank account.

Internet use – which is the highest in the world – combined with high engagement with financial products would lead to investment opportunities, he said.

Vazirani (pictured) pointed to India Stack, which offers digital infrastructure for businesses and governments, and holds details of 1.2 billion biometric IDs and 870 million biometrically-linked bank accounts.

‘India Stack will propel Indian financial inclusion to one of the highest in the world,’ he said, adding that the government had rolled out a social security programme that saw money paid directly into bank accounts.

Financial inclusion will help accelerate growth in the domestic economy and see more funds channelled into mutual funds, meaning the financial sector will grow further, he added.

‘We have seen significant amounts of domestic savings channelled into equity mutual funds over the last four years,’ said Vazirani.

‘What is really heartening for long-term investors is most of the money now seems to be coming from monthly savings plans…the average amount saved in these is about $50 a month… as more money comes into the domestic equity savings market, our belief is this will sustain the Indian market.’

3 comments so far. Why not have your say?

Gordon Russell

Apr 18, 2018 at 05:32

Jupiter India performed very well for several years and I had a decent sized stake in it . But throughout 2017 the fund manager got it hopelessly wrong and all my gains were wiped out . It was the worst performing India fund by far , losing money in a rising equity market . I sold half my holding at Xmas 2017 in disgust , and unless there is a vast improvement as this year unfolds I will exit completely .

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Apr 18, 2018 at 06:06

Losing money big stye. Its a Dog. cant get out until it (hopefully) makes some comeback, but the excuses in this article don't make me happy.

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laang lee

Apr 18, 2018 at 15:37

What is it about India.? Every year a prospect of great reward for investors. So much growth, new cities, new infrastructure, new development, a tech revolution, so many educated Indian workers. This should mean prosperity, and opportunity for fund holders. But it is a roller coaster that brings you back to ground level.

The fug of smog that you can see from the plane as you circle any major city, is a simile for the way profits disappear before they materialize.

They disappear in a puff of smoke. Reappearing in the pockets of a few rich families.

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