Capitalise on India's growth with Jupiter India

One way to tap into the country’s potential growth is Jupiter India Fund (GB00BD08NQ14), which invests in the shares of companies that operate or reside in India. The fund has been managed by Avinash Vazirani since its launch in February 2008 via an investment style that combines growth investing with value investing, known as growth at a reasonable price (Garp). Garp investing involves looking for companies that have consistent earnings growth above broad market levels and which seem to be trading at reasonable valuations. This method helps to avoid the extremes of growth and value investing.

Historically, this investment process has worked well for this fund. For example, it returned 53.77 per cent, 12.69 per cent and 22.76 per cent in 2014, 2015 and 2016, respectively, while its benchmark, MSCI India index, returned 31.58 per cent, -0.69 per cent and 17.57 per cent. 

But more recently the fund has underperformed its benchmark so that its one-, three- and five-year cumulative returns do not look good. For example, last year it fell 19.9 per cent while its benchmark only fell 1.54 per cent, and so far this year it has fallen 0.75 per cent while its benchmark has risen 8.14 per cent. 

Mr Vazirani says this underperformance is because “our strategy has significant off-benchmark exposure and, in comparison, is overweight in smaller companies. We believe that investors have been overlooking solid fundamentals in Indian companies, especially in the small- and mid-cap space. But although market sentiment has been poor we continue to see strong earnings growth from the companies in our portfolio."

And Laura Suter, personal finance analyst at investment platform AJ Bell, says: “Investors in the fund took a big hit in 2018 when the Indian government intervened in the oil market causing the nation’s oil stocks to plummet, because the fund was heavily exposed to this sector.”

The fund still has significant exposure to this area, with 13.5 per cent of its assets in oil and gas shares at the end of June, and its largest holding is Hindustan Petroleum (HINDPETRO:NSI).

Another risk is that the fund invests in just one emerging market economy so it is more exposed to its risks than a broad global emerging market fund, and cannot allocate away from Indian equities if they are not doing well.  

However, Mr Vazirani hopes that the fund’s performance will improve because he invests in companies that should benefit from trends including rising domestic consumption. He also believes that potential benefits from changes such as the introduction of a single goods and services tax across the country have not yet come through, but when they do the fund’s performance will improve. And the fund's performance up until 2017 suggests that Mr Vazirani and his team are capable of picking companies that will make the fund deliver good returns and outperform. 

Investors in Indian equities, meanwhile, “should not be too focused on short-term figures, but instead consider the long-term potential of the world’s largest democracy – if they are prepared to take on a high level of risk,” adds Ms Suter.

Also, the fund's newer X share class (GB00BD08NQ14), which is offered by platforms such as Hargreaves Lansdown, has a very reasonable ongoing charge of 0.69 per cent. This is both lower than that of many specialist and broad equities funds.

So if you are looking for growth over a long time horizon, and can tolerate high risk and volatility, Jupiter India looks like a good way to achieve this. Buy. ZB

*These figures are for an older share class