InvestNow News – 20th Dec 19 – India Avenue – Fund and Market Commentary: November 2019
The India Avenue Equity Fund (wholesale) delivered a return of 1.24% for the month of November 2019. Over the last 3 months the fund has delivered 8.45% beating the MSCI India index by 1.94%.
In last month’s factsheet, we mentioned that the Government of India (GoI) was likely to disinvest its stake in selected state owned enterprises and hence it was unsurprising for us when the Government announced in November a major strategic disinvestment push by selling its entire stake in the second largest state-owned enterprise (SOE) refiner Bharat Petroleum along with partial/full stake sale in 5 other SOEs. This is expected to generate ~INR 800bn (~US$11bn) in divestment proceeds which is a major boost towards GoI’s divestment target of INR1,005bn (~US$14bn) for the current fiscal year.
The Sensex (an Index of India’s largest 30 largest companies) hit an all-time high during the month of November. Compared to mid and small cap indices which are flat over three years, the Sensex is up 48% over this time. This divergence is unprecedented but is part of the reason why we run an all cap approach, rather than a pure focus on one particular market cap segment of the market. As a result, the indices like the Sensex and Nifty (top 30 and 50 companies by market capitalisation respectively) have become expensive with 1-year forward price-earnings multiple of approximately 19x (Nifty), whereas our fund’s forward P/E is closer to 15.5x.