HSBC’s Indian equity fund delivers strong returns

HSBC Global Investment Funds – Indian Equity, one of the world’s largest offshore Indian equity funds, rose 96 percent in the year-to-date, versus a 66 percent gain in the S&P/IFCI India index over the same period. The Fund, with over US$5 billion in assets, is the top-performing Indian equity fund in Hong Kong this year.

The outstanding performance can be attributed to the high conviction and top-down investment strategy adopted by fund manager Sanjiv Duggal and his team at Halbis, the active fundamental investment specialist of HSBC Global Asset Management. This strategy has effectively generated excess returns from the India markets across a variety of economic and market cycles. Since its launch in March 1996 to the end of August 2009, the Fund has returned an annualised 21 percent compared to 11 percent for the benchmark.

During the financial crisis in the second half of 2008 and the first half of 2009, the fund manager accumulated deep value cyclical growth sectors, such as automobiles and real estate, on cheap valuations as these sectors faced substantial near-term headwinds. The manager was positive on the market when valuations hit a near three-year low for investors in February and March this year, and expected growth to surprise positively on the aggressive monetary policy easing coupled with a variety of fiscal stimulus and other measures. These resolute reactions to the fast-moving Indian market added to the outstanding performance of the Fund.

Mr Duggal, Investment Director, Equities at Halbis, said: “Earnings growth estimates for the broad market have been upgraded for five consecutive months since April, with the market now expecting 15 percent for the year ending 31 March 2010 and 21 percent for the following year. Economic improvement should boost earnings for domestic cyclical growth industries, as disposable incomes and demand rise. We expect infrastructure and investment spending to pick up in the last quarter of this calendar year.

“The swings in the past couple of months demonstrate that it is difficult to make short-term market predictions. We will closely monitor the progress of the monsoons, which has resulted in some downgrades to the expected GDP for 2009 and the trend in commodity prices. It is worth noting that agriculture only accounts for about 17 percent of GDP and poor yields will be softened by higher government procurement prices for agriculture produce and other measures. We retain our positive bias in our medium-to-long-term view on the market, given its attractive economic and corporate growth profiles. Investors should expect that investing in India involves high volatility and consider it a longer-term investment in order to benefit from India being one of the world’s fastest growing economies.”

Indian equity investment is part of HSBC Global Asset Management’s core emerging market capability, which had approximately US$70 billion of assets under management in emerging markets globally as at June 2009.