£440m Aberdeen New India returns 11.2%

Kristy Fong

The £440 million Aberdeen New India Investment Trust has reported a net asset value (NAV) total return of +11.2% and share price total return of +3.7% for the 12 months to March 31, 2022, compared to the +23.9% return of the fund’s benchmark MSCI India Index.

Aberdeen New India’s biggest investments at March 31 included Infosys, Tata Consultancy Services, ICICI Bank, Bharti Airtel, Hindustan Unilever, Power Grid Corporation of India, Ultratech Cement, HDFC Bank and Kotak Mahindra Bank.

Aberdeen New India’s senior investment directors Kristy Fong and James Thom wrote to investors: “Looking ahead, we remain confident in our long-term quality approach. The core of the portfolio continues to be built around the highest quality stocks.

“That said, we have taken steps to reposition the portfolio to reflect the changing macro environment and where we see attractive future opportunities such as renewable energy and technology/internet.

“Over the past 12 months, we reduced our exposure to the consumer staples sector by exiting lower conviction holdings such as Jyothy Labs and Godrej Consumer.

“In addition, we divested Gujarat Gas as rising input costs, most notably in liquefied natural gas, will likely put significant pressure on the company’s margins. Conversely, we introduced Hindalco Industries, a vertically integrated, low-cost aluminium and copper play.

“As a global leader in automotive and can-aluminium sheets, Hindalco is a clear beneficiary of the rising trend towards lighter automotive weights for electric vehicles and can better support lower emissions. It also stands to benefit from a greater push for the use of recyclable materials.

“At the same time, we adjusted the mix of holdings within the financials sector to include ICICI Bank.

“In our view, the lender has proven, on a fundamental basis, that it is firmly back on a growth footing with its new management team, sensible risk management and innovative digital capability. This was funded with the sale of Axis Bank.

“Within the insurance sector, we exited ICICI Prudential and participated in the IPOs of leading health insurer Star Health and Allied Insurance and South India-based affordable housing company Aptus Value Housing Finance.

“Elsewhere, we initiated Vijaya Diagnostic Centre, a dominant player in the south of India that operates in a highly fragmented market. Against this, we tidied up lower conviction holdings Biocon, Bosch and Shree Cement.

“Market conditions globally have become more volatile this year. India is not immune to the turmoil. Policymakers have the unenviable task of managing commodity-led inflation without compromising the country’s economic recovery from the Covid-19 crisis.

“The Reserve Bank of India revised its initial dovish stance after the end of the Year and, in May, raised its policy repo rate by 40 basis points to 4.4%.

“Rising commodity prices and higher interest rates may hinder earnings growth momentum, which could lead to market wobbles, given that Indian equities are trading at a premium.

“In these times of uncertainties, we expect our portfolio holdings to demonstrate earnings and balance sheet resilience relative to their peers. We remain confident that our companies will deliver attractive risk-adjusted returns over the long term.”

After eight year as chairman, Hasan Askari will be stepping down from the board of the company at the AGM on September 28, 2022. His successor as chairman will be Michael Hughes.