Today we are launching our 8th equity theme basket with a focus on India and the available GDRs (depositary receipt) on the world’s main exchanges and Saxo’s trading systems. Global investors with a long-term horizon should overweight India in their portfolio as this equity market has the potential to deliver strong annualised returns as India’s economy and capital market mature.
A difficult market but interesting opportunities
India’s economy and capital markets have been quite closed, and the country has only slowly adopted a more pro-business and access for foreign capital. As a result, it has been difficult for foreign investors to get access to the wealth generation of India. However, things are changing and today investors can invest in ETFs tracking the MSCI India Index. If that is an option, why even bother making an equity theme basket? The MSCI India Index is incredibly concentrated with 35% of the index spread across only 5 stocks and around 48% across 10 stocks.
Our approach was to find the Indian stocks that are publicly listed in the US or UK, so clients can get an overview of this market, and interestingly some of stocks we have found are not listed in India and thus not part of the MSCI India Index. Examples are Azure Power Global, MakeMyTrip, and WNS Holdings. Our bet is that more technology-driven companies from India will over time go public in US and UK markets due to accessibility of capital following in the footsteps of Chinese companies. As that happens our basket will evolve and become even more interesting with time. For now, we have found 19 stocks listed in the US and UK (see table) representing $686bn in market value. As the table shows, Indian companies have had a rough 2020 like the rest of the world with declining revenue on average but the largest companies have managed to grow the business.
|Reliance Industries Ltd||Oil & Gas Producers||182,786||4.8||10.4||24.8|
|HDFC Bank Ltd||Banking||146,404||18.5||NA||19.6|
|Infosys Ltd||Technology Services||81,364||9.4||20.9||2.4|
|ICICI Bank Ltd||Banking||56,737||16.8||NA||30.6|
|State Bank of India||Banking||44,891||4.2||NA||NA|
|Wipro Ltd||Technology Services||35,559||1.8||11.7||-23.4|
|Axis Bank Ltd||Banking||30,143||14.0||NA||NA|
|Larsen & Toubro Ltd||Engineering & Construction||28,089||8.2||6.5||32.8|
|Tata Motors Ltd||Automotive||15,067||-13.6||-22.9||NA|
|Mahindra & Mahindra Ltd||Automotive||14,359||-11.7||-17.4||NA|
|Tata Steel Ltd||Steel||10,824||-11.5||-40.1||NA|
|Vedanta Ltd||Metals & Mining||11,570||-8.1||-10.3||NA|
|Dr Reddy's Laboratories Ltd||Biotech & Pharma||9,934||13.5||-14.5||0.4|
|GAIL India Ltd||Gas & Water Utilities||8,381||-4.6||-6.6||21.8|
|MakeMyTrip Ltd||Internet Media & Services||3,965||-64.1||-271.9||-6.0|
|WNS Holdings Ltd||Technology Services||3,787||3.0||-5.9||7.3|
|Azure Power Global Ltd||Electric Utilities||1,461||20.7||12.0||56.2|
|Sify Technologies Ltd||Technology Services||751||1.6||21.0||19.3|
|Yatra Online Inc||Internet Media & Services||151||-75.1||17.6||49.4|
Source: Bloomberg and Saxo Group
* Sales and EBITDA growth is measured on 12-month trailing figures, Diff to PT is the difference between consensus price target and the current price in %
The basket is up 113% since December 2015 and has outperformed the MSCI World although the Indian equities and the country was hit hard by the Covid-19 pandemic. This year the India basket is one of the best performing equity themes up 22% year-to-date. Our basket has delivered 0.47% monthly excess performance compared to the MSCI India Index on a total return basis in USD translating into annualized returns of 17.1% p.a. vs 10.9% p.a. Our basket has a beta of 1.02 to the MSCI India Index.