India: 2020 vs 2010

Where was India in 2010?

A decade ago a much higher nominal GDP growth rate (driven by consumption) was the norm, but an investor sitting in 2010 would have had cause to hesitate before allocating money to India. The government’s fiscal deficit was 6.5% of GDP, an 11 year high, and inflation was double digits with real interest rates negative and rising. A weak coalition government was unable to pass legislation and was facing the onset of high profile corruption scandals. 2010 also coincided with India’s worst ranking in the World Bank’s Ease of Doing Business Index at 139th out of 190 countries.

2020 – 03 Investment Update

As the global COVID-19 pandemic evolves, from an investment research perspective the key question n our mind is what are stocks in India pricing in and to what extent? This is because,in episodes of uncertainty and volatility, markets have historically been least efficient in pricing securities thereby enhancing our ability to potentially generate excess returns through our remit of investing in quality businesses at attractive valuations. The update is divided into four short sections. The first part provides some data points as context for the second part which is an outline of what expectations we believe are baked into the current prices, which will inform part three – what are we doing about it from a portfolio perspective. Finally there is an appendix which goes deeper into the methodology and assumptions we have made.

The Great Indian Budget ‘Tamasha’ II

“Tamasha” is a Hindi word that can mean either a “grand show” or alternatively a “fuss” or a “commotion”.

Every year, on February 1st, the central government presents the Union Budget. It is just an account of the receipts and expenditure for the current year and the Budget for next year. Ceremoniously, market participants and the business world line up a plethora of sops and incentives that they desire from the Finance Minister. This year expectations centred on “fiscal compromise” (i.e. a higher fiscal deficit), either through measures to reignite demand (personal tax cuts) or higher spending.