Malta based FMG says it expects continues positive returns from its India Opportunity Fund – which has gained 89% over 20 months on its dollar share class – because of the tailwinds supporting Indian growth.
Improving economic policy changes, infrastructure expansion and a halving of the fiscal deficit are three factors it believes will enable India to continue growing faster than global GDP.
Ongoing factors that will support the mid and large cap companies the fund invests in include: a young population with a growing middle class; a high domestic savings rate; and growing export led growth. Micro level factors are also highlighted by FMG, such as the data suggesting one city alone, Bangalore, has more grade ‘A’ offices than Singapore, and that the local film industry is bigger than that of the US and Canada combined.
During the first quarter this year, the Reserve Bank of India cut its key interest rate. FMG said in an earlier note that this suggested the Bank was “confident of lower inflation and has shifted its focus to growth. Banks have not yet begun to pass on the savings, but as and when this happens this should provide a strong contribution towards earnings as well as capital expenditures.”