Net Asset Value(s)

RNS Number : 0855R

India Capital Growth Fund Limited

06 December 2016

 

6 December 2016

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

Net Asset Value statement at 30 November 2016

Net Asset Value

The Company announces its Net Asset Value per share as at 30 November 2016 was 91.09 pence.

In November the Net Asset Value (NAV) was down 10.8% in Sterling terms, whilst the BSE Mid Cap Total Return Index was down 11.3%, delivering an outperformance against the notional benchmark of 0.5%. In local currency terms, the NAV was down 6.2% for the month.

Portfolio update

Positive attribution to the portfolio's performance came from Welspun India (up 22.6%), Tech Mahindra (up 11.4%), Indian Bank (up 9.1%) and Essel Propack (up 6.8%). Negative attribution came from Dewan Housing (down 21.8%), Federal Bank (down 13.6%) and Kitex Garments (down 19.9%).

Market and economic update

Indian equity markets corrected this month as the BSE Sensex fell 4.6%, whilst the BSE Mid Cap Index was down 6.8%, both in local currency terms. The selling pressure arose as a consequence of Prime Minister Modi's surprise decision to "demonetise" all INR500 and INR1,000 notes, accounting for 85% of total cash in circulation. This is a bold attempt to purge the economy of "black" money (income on which no tax has been paid) and counterfeit notes which prompted a tsunami of cash deposits (circa US$115bn) entering the banking system. Having started the year at 7.3%, two year Government yields dipped below 6%, contrasting with rising bond yields in developed markets, driven by the expectation of better economic growth from a Trump Presidency. In November, Foreign Institutions were net sellers (US$2.6bn), while Domestic Institutions were net buyers (US$2.7bn) and India's Rupee depreciated 2.3% against the US Dollar and 5.2% against Sterling.

India's GDP for Q2 FY17 (ended September 2016) grew at 7.3%, driven by agricultural growth and increased Government spending. However, looking ahead, consensus estimates suggest that the economic impact of demonetisation will be severe (0.5% to 1.0% reduction in GDP), given India's high dependence on cash based transactions. Consumption based activity has been hardest hit with companies reporting collapsing sales and weak pricing, food products included. Elsewhere sectors such as real estate, jewellery and construction related industries will feel the pinch. Cash in the system is currently very low and much depends on how quickly the Government can reliquefy the economy, but current expectations assume a six month slowdown, at best. We anticipate lower interest rates and additional growth supporting policies in the New Year. Although uncertainty about the near term impact is high, if successful, this policy could prove a crucial step in the positive development of India's economy. Elsewhere Consumer Price Inflation for October came in at 4.2%, a 14 month low, led by lower food prices whilst the impact of demonetisation is expected to have further deflationary effects.

Portfolio analysis by sector as at 30 November 2016
Sector	No. of Companies	% of Portfolio
Financials	9	26.8%
Materials	8	18.7%
Consumer Discretionary	7	17.9%
Industrials	5	10.0%
Consumer Staples	4	9.5%
Healthcare	4	7.3%
IT	2	5.1%
Total Equity Investment	39	95.3%
Net Cash		4.7%
Total Portfolio	39	100.0%
Top 20 holdings as at  30 November 2016
Holding	Sector	% of Portfolio
Yes Bank	Financials	5.0%
Federal Bank	Financials	4.4%
Jyothy Laboratories	Consumer Staples	4.2%
Dewan Housing	Financials	4.0%
Motherson Sumi Systems	Consumer Discretionary	3.5%
Dish TV India	Consumer Discretionary	3.4%
PI Industries	Materials	3.4%
Kajaria Ceramics	Industrials	3.2%
City Union Bank	Financials	2.9%
Welspun India	Consumer Discretionary	2.9%
The Ramco Cements	Materials	2.8%
Indusind Bank	Financials	2.8%
Essel Propack	Materials	2.6%
Finolex Cables	Industrials	2.6%
Sobha Developers	Financials	2.6%
Max Financial Services	Financials	2.6%
Divis Laboratories	Healthcare	2.6%
Tech Mahindra	IT	2.6%
Berger Paints India	Materials	2.6%
NIIT Technologies	IT	2.5%
Portfolio analysis by market capitalisation size as 30 November 2016
Market capitalisation size	No. of Companies	% of Portfolio
Small Cap (M/Cap < US$2bn)	26	60.9%
Mid Cap (US$2bn < M/Cap < US$7bn)	9	23.0%
Large Cap (M/Cap > US$7bn)	4	11.5%
Total Equity Investment	39	95.3%
Net Cash		4.7%
Total Portfolio	39	100.0%

* Please note that as at 1 September 2016, our mid cap market capitalisation definitions have been amended from INR60bn < x < INR250bn to US$2bn < x < US$7bn

 

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