QROPS Advice: Investment News: Spotlight on India funds

A vast majority of investors are aware of the phenomenal economic growth that India has achieved over recent years, with most benefitting from this via an exposure in a traditional 'BRIC' fund. However, whilst the majority of BRIC funds have posted excellent returns, a growing number of investors have instead recently chosen to invest directly into Indian-focussed equity funds.
The outlook for the Indian economy is very positive, uncommon amidst a global recession. This is confirmed by the recent revision of the IMF's economic growth forecasts for 2010, adjusting that of India to 7.7 percent from an original forecast of 6.4 percent (the same forecasts predict an average of approximately 3.9 percent, at a global level).
One of the reasons behind the excitement around India lies in its current economic state, unlike other most other economies labelled 'emerging', India is truly in its economic infancy. It is the country's place towards the bottom of the development ladder that makes it compelling for investors, representing relative immaturity and therefore greater growth potential.
Each of the four BRIC constituent countries owes its growth to different roots; the phenomenal rise of China can be greatly attributed to a thriving export and manufacturing industry, whereas Brazil and Russia's boom relied on a natural abundance of much-needed commodities.
In comparison, India's story is very much a domestic one. Private domestic consumption accounts for 57% of GDP in India compared with only 35% in China. Additionally, India's population is soaring: by 2025, it's projected to surpass China's. The demographic changes will provide a well educated, English speaking, young and vibrant workforce to India, in contrast to the ageing population problem that China currently faces.
Whilst a loyal and expanding domestic economy are essential to the growth of any country (the Chinese government is actively looking to create such conditions, such is the domestic demand for western products), India recognises that it has to look outside of its own boundaries to enact long-term economic development. Plans are afoot with much-needed significant development in India's infrastructure, which would stimulate the development of a manufacturing sector that lends itself to a vast resource of young workers.
Foreign investment (also known as 'speculative' or 'hot' money) inevitably follows any success story, more so against an economic backdrop such as the current one. Following similar steps to China, it is thought that the Indian government is likely to introduce measures to control unprecedented foreign investment ($17 billion of funds flowed into Indian equities last year, appreciating the Indian Rupee over 10% since Q1-end 2009); a higher reserve ratio requirement to its banks or a curb on interest payments to non-resident investors are just two of the ways that this could be achieved. Whilst this may have a short term negative effect on stock markets, it demonstrates a responsibility that puts India in a much better place, long term.
Sanjiv Duggal, manager of the Hansard HSBC Indian Equity fund (MC101, available in HIL & HEL) commented "The consumer discretionary and real-estate sectors have underperformed recently on concerns of measures by the central bank. But we expect interest rates to normalise following the sharp easing by the central bank in 2008. We think consumption should remain robust in 2010. GDP growth forecasts for the current fiscal year ending March has been steadily revised up from around 5% to around 7%. This upward revision has come despite the poor monsoon affecting farm output as industrial production has been strong."
Hansard has a variety of fund links across a diverse range of asset classes, whether your clients have a conservative, balanced or adventurous outlook. To find out more about any of our fund links please contact your Hansard Account executive who will be able to assist you further.