ASHOKA INDIA EQUITY INVESTMENT TRUST: Short-Term Blip, But India Fund Outperforms As Economy Booms
Investment trust Ashoka India Equity is a fund established to generate investment returns for shareholders from a booming Indian economy. So far it’s done pretty well, gaining more than 70 percent since its launch in July 2018.
Still, an economy growing at 6 percent a year, or just below that, is no guarantee of investment success. Over the past year, the Indian stock market has had a bit of a jitter due to twin fears of a possible global economic recession and the ongoing war being waged by Russia against Ukraine.
A fragile global economy means fewer exports for some of India’s top IT giants. Also hanging over the markets are next year’s general election and the possibility of replacing the business-friendly government of the National Democratic Alliance.
The nervousness of the markets is reflected in Ashoka India Equity’s near-term performance numbers: the fund’s price has fallen 7 percent over the past year.
Listed on the UK stock exchange, the trust is managed by investment house White Oak Capital, a specialist in Indian equities with offices in Mumbai, Singapore, Mauritius and Europe (including the UK). White Oak was founded in 2017 by Prashant Khemka, who made his mark running Indian and emerging markets investment portfolios for Goldman Sachs.
Ayush Abhijeet, who helps run the trust, says one of the factors contributing to the trust’s recent weak performance is the investment team’s refusal to invest in parts of the market that have held up well, for example utilities and energy stocks, supported by high prices.
The team favors companies that will benefit from the long-term growth of the economy – driven by a fast-growing middle class with money to spend and the country’s reputation for expertise in areas such as healthcare and IT.
As a result, the trust’s assets, valued by the market at just over £200 million, are heavily invested in the banks whose people take money with money – institutions such as ICICI Bank and HDFC Bank.
It also has large interests in companies that make the goods the middle class buys, such as cars (Maruti Suzuki) and jewelry (Titan). Four of the trust’s top 10 holdings are IT-oriented. The trust is currently invested in 88 companies from a universe of 750 stocks.
Given the trust’s focus, it comes as no surprise that Abhijeet is optimistic about the Indian economy. He says: ‘The economy is growing at 6 percent a year and unlike other parts of the world, the banking system is in good shape – the best shape, I would say, in some 20 years. Companies also have low debts.’ He adds: “As for the consumer-led economy, it is not affected by inflation to the same extent as elsewhere in the world. Inflation is more favorable and fluctuates between 6 and 7 percent. In terms of food, the country is self-sufficient and does not import food inflation from abroad.”
Not everyone is so optimistic. Amitabh Chaudhry, boss of Indian bank Axis, says higher interest rates could have a negative effect on the economy, forcing growth expectations to be “tempered a bit.” The trust has an ongoing annual fee of 0.34 percent and the exchange identification code is BF50VS4 and ticker AIE. Other companies that manage Indian mutual funds include Abdrn, JP Morgan and Ocean Dial Asset Management.
Last week, White Oak published details of a new emerging markets trust – Ashoka WhiteOak Emerging Markets – set to appear on the London Stock Exchange early next month.