The parallels between the current opportunities for investors in India resemble those present in Canada a few decades ago.
“We think India is kind of like where Canada was in the 80s when we were growing fast and mortgage rates were much, much higher,” said Christine Tan, Sr. Portfolio Manager, Excel Investment Counsel Inc. “We think that will change as the economy matures and that’s great for investors that are invested early.”
Investor interest in India was really kick started two years ago thanks to a transformational election won by Narendra Modi, which brought in the multinational corporates, big sovereign wealth investors and retail investors.
It also helps that macro factors like young demographics, low gross national income per capita are already in place, as well as a strong finance minister and well respected central bank governor.
“What we find compelling is that every country Modi has visited has made some commitment in terms of direct investment in India because they see the potential there,” said Tan. “A lot of reforms are taking place to make it simpler and easier and there’s better governance, so that global capital is starting to find its way into India.”
Excel recently announced the filing of a preliminary prospectus for two new funds to supplement its Excel India Fund, which is the largest and longest-running mutual fund in Canada.
The new Excel India Balanced Fund will target current income and long-term capital appreciation by investing in an actively managed, diversified portfolio comprised primarily of publicly-listed equities and investment-grade fixed-income securities, issued in India. “The balanced fund is getting a lot of interest because you are getting the opportunity to invest in bonds that are paying you a very attractive yield because of the higher domestic rates in India,” said Tan.
The other new Excel offering, the New India Leaders Fund, seeks long-term growth of capital by investing primarily in equity securities of companies located in India that are considered to be emerging industry leaders. “In Canada we’re used to thinking of small and mids as resources and it is true,” said Tan. “But in India the total market cap is only about 12% resource based.”
In general, investing in Canada gives advisors an opportunity to get clients away from something they can be overexposed to.
“For Canadian investors especially I think India is a very interesting opportunity because of the inverse correlation to oil,” said Tan. “As Canadian investors we’re naturally exposed to energy. I think having that built in hedge in your portfolio is good.”