Net Asset Value(s)

RNS Number : 3536T

India Capital Growth Fund Limited

05 December 2011

 



India Capital Growth Fund Limited

05 December 2011

India Capital Growth Fund Limited (the "Company" or "ICGF")

30 November 2011 NAV Statement

Net Asset Values

The Company announces its net asset value per share as at 30 November 2011 was 43.50 pence

Portfolio Update

During November the Net Asset Value (NAV) of India Capital Growth Fund Limited declined 9.3% in Rupee terms, as against the BSE Midcap Index which was down 10.6%. In Sterling terms the NAV was down 12.8% as the Rupee weakened by 4.1% against Sterling during the period.

Net foreign investor outflows from India in November were USD787m, bringing the total for the year to a net outflow of USD389m. However, Indian domestic pension funds and mutual funds inflow was USD162m during the month.

In the last 3 months the Rupee has depreciated by 13.4% against USD and 7.8% against GBP. This was not just because of equity outflow but more a function of India's deteriorating macro position with twin deficits on the capital and current account front. The RBI has stated that it will not support the currency for fear of wasting FX reserves (which are lower than they were in 2008), and sucking Rupee liquidity out of the domestic banking system.

India's 2QFY12 GDP was in line with expectations at 6.9%, but much lower than the 7.7% growth in Q1. The RBI has cut its FY12 GDP growth forecast from 8% to 7.6%.  Industrial Production growth data for September also came in lower than expected at 1.9% but headline inflation continues to remains above the comfort levels of the Reserve Bank of India, rising to 9.73% in October. Lower growth and lower expectations will ease concerns about inflation, but in step with other Asian economies it is the extent of the slowdown which will be the cause of the market's fear from now on.

The portfolio's exposure to the consumer staples and cash contributed the majority of the positive attribution for the month. Jyothy Labs (manufactures and distributes household products) rose 2.5%, Cairn India (Oil exploration) rose 1.1% whilst Berger Paints (manufactures and distributes paints) rose 2.8%.

The negative contribution to the fund's performance was stock specific and spread across various sectors. Bilcare, (a company that specialises in the packaging pharmaceutical products), Sintex Industries (a diversified manufacturing and engineering company), and Prime Focus (Post production and visual effects provider) fell 32%, 20% and 15% respectively.

Putting global macro issues to one side for the moment, our sense is that the situation in India continues to be depressed. Our interaction with companies indicates lower levels of visibility, falling confidence and a reluctance to see beyond short term issues. The glass remains half full at best. There are further signs of slowing consumer spending also, particularly in the rural economy which has in recent years been a key contributor to growth.  

On a much more positive note we are starting to sense that the government is finally reacting to its precarious position. This week witnessed a highly successful auction of $10bn of capacity for foreigners to acquire Sovereign and Corporate debt which will support the Rupee in the next few months and paves the way for further liberalisation of the bond markets. The Cabinet has finally approved reform in the multi format retail sector which opens the door for foreign companies to own up to 51% of a domestic business. Although causing parliamentary logjam currently, in the long term this is a huge step. In Industry the Government is making progress on improving coal supplies, fast tracking environmental approvals, and forcing State Electricity Boards to restructure their balance sheets.

The portfolio continues to run a large cash position seeking selective opportunities to invest where we believe downside in valuation is limited from here.

Analysis of holdings at 30 November 2011

Sector Summary	No. of Companies	% of Portfolio
Financials	9	22.3%
Industrials	6	13.4%
Materials	6	7.4%
Consumer Discretionary	4	6.9%
Health Care	3	5.3%
IT	3	4.5%
Energy	2	4.5%
Utilities	1	2.4%
Consumer Staples	2	2.3%
Telecom Services	1	1.8%
Total Equity Investment	37	70.8%
Net Cash		29.2%
Total Portfolio		100.0%

Top 10 equity holdings at 30 November 2011

Holding	Sector	% of Portfolio
Federal Bank	Financials	3.7%
Prime Focus	Consumer Discretionary	3.6%
Manappuram Gen Fin & Leasing	Financials	3.4%
Jain Irrigation	Industrials	3.4%
Sintex Industries	Industrials	2.9%
Cairn India	Energy	2.9%
Eicher Motors	Industrial	2.5%
J&K Bank	Financials	2.5%
Bilcare	Health Care	2.5%
CESC	Utility	2.4%

Portfolio breakdown by size at 30 November 2011

Size	No. of Companies	% of Portfolio
Small Cap (M/Cap <INR 15bn)	11	16.7%
Mid Cap (INR 15bn <M/Cap<INR 100bn)	20	43.1%
Large Cap (M/Cap > INR 100bn)	5	11.0%
Unlisted	1	0.0%
Cash/Cash Equivalent		29.2%
Total	37	100.0%

 

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