Net Asset Value(s)

RNS Number : 6211G

India Capital Growth Fund Limited

07 November 2018

 

7 November 2018

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

Net Asset Value statement at 31 October 2018

Net Asset Value

The Company announces its Net Asset Value (NAV) per share as at 31 October 2018 was 92.54 pence.

In October the NAV was unchanged in Sterling terms, whilst the BSE Mid Cap TR Index was down 0.2%, delivering an outperformance against the notional benchmark of 0.2%. In local currency terms, the NAV was down 0.9% for the month

Portfolio update

Positive contribution to the portfolio's performance came from Federal Bank (up 17.0%) and Divi's Laboratories (up 13.2%). Negative contribution came from Indusind Bank (down 15.7%), Ramkrishna Forgings (down 11.1%) and Emami (down 20.1%).

Market and economic update

In tandem with a weak month for global equities, October saw another fall in India driven this time by larger cap names with the BSE Sensex down 4.9% and BSE Mid Cap TR Index down 1.0% (in local currency terms). However the domestic macroeconomic environment showed respite as Brent Crude Oil prices corrected 11% and the Reserve Bank of India (RBI) announced a liquidity infusion into the monetary system providing much needed relief to Non-Banking Finance Corporations and the bond market. Indeed, the yield on 10 year Government Securities declined from the recent high of 8.4% to 7.9%. The currency remained under pressure however with the Rupee depreciating by 2.0% against the US Dollar and 0.9% against the Pound Sterling as Foreign Institutions were again net sellers for the month (US$3.8bn). Appetite from Domestic Institutions was still strong with net inflows of US$3.5bn.

The RBI decided to keep interest rates on hold in its policy meeting against the market expectation of a 25bps increase. It however elevated its policy stance from "neutral" to "calibrated tightening", suggesting that the rate hiking cycle is not yet over, despite marking down its Consumer Price Inflation (CPI) forecast for H2FY19 to 3.9%-4.5% from 4.8%. Food prices seem to be the chief reason and this was reflected in the CPI inflation figure for September which was 3.8% compared to 3.7% in August.

Indian companies began reporting Q2FY19 earnings. The picture so far shows that whilst revenues have risen fairly well, operating margins have contracted as few firms have been able to pass on higher input costs from higher oil prices, leading to lower than expected earnings. IT, Financials, Industrials and Consumer Staples sectors have outperformed expectations whilst Energy, Health Care, Consumer Discretionary and Cement companies have disappointed. Within the Financials sector, banks are showing a steady recovery in balance sheets as fewer loans have slipped into non-performing territory resulting in lower credit costs. Industrials so far have reported good operating performance on the back of strong order inflows with the order book of the market leader, Larsen & Toubro, growing by 42% (YoY).  Consumer staples' outperformance was helped by robust rural consumer demand.

Portfolio analysis by sector as at 31 October 2018
Sector	No. of Companies	% of Portfolio
Financials	8	20.3%
Materials	8	18.2%
Consumer Discretionary	6	15.1%
Consumer Staples	4	9.6%
IT	2	8.9%
Industrials	4	8.6%
Healthcare	3	8.0%
Real Estate	2	2.9%
Communication Services	1	0.3%
Total Equity Investment	38	92.0%
Net Cash		8.0%
Total Portfolio	38	100.0%
Top 20 holdings as at 31 October 2018
Holding	Sector	% of Portfolio
Tech Mahindra	IT	4.9%
Federal Bank	Financials	4.2%
Jyothy Laboratories	Consumer Staples	4.0%
NIIT Technologies	IT	4.0%
City Union Bank	Financials	4.0%
Divi's Laboratories	Healthcare	3.7%
Motherson Sumi Systems	Consumer Discretionary	3.7%
Ramkrishna Forgings	Materials	3.6%
Aurobindo Pharma	Healthcare	3.4%
Exide Industries	Consumer Discretionary	3.3%
Radico Khaitan	Consumer Staples	3.1%
Kajaria Ceramics	Industrials	3.1%
PI Industries	Materials	3.0%
Welspun India	Consumer Discretionary	3.0%
Balkrishna Industries	Consumer Discretionary	3.0%
Berger Paints India	Materials	2.8%
Sobha Developers	Real Estate	2.8%
Indusind Bank	Financials	2.8%
Finolex Cables	Industrials	2.5%
Capital First	Financials	2.4%
Portfolio analysis by market capitalisation size as 31 October
Market capitalisation size	No. of Companies	% of Portfolio
Small Cap (M/Cap < US$2bn)	27	56.7%
Mid Cap (US$2bn < M/Cap < US$7bn)	9	27.6%
Large Cap (M/Cap > US$7bn)	2	7.7%
Total Equity Investment	38	92.0%
Net Cash		8.0%
Total Portfolio	38	100.0%

 

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