India is in for long period of high and stable growth’

India is in for long period of high and stable growth’

Source: Economic Times..

Jpmorgan Asset Management recently forayed into mutual fund business in India. The company already has an exposure of around $6 billion to Indian equities through India-dedicated offshore funds. . Excerpt: What’s your view on the Indian equity market? JPMorgan group is optimistic about the Indian equity markets. With good growth prospects for the Indian economy, Indian companies are expected to grow topline and bottomline at good rates. Already, the Indian companies are witnessing a dramatic improvement in their return on equity and return on capital employed. Balance sheets are looking robust. Fundamentally, the India story looks good. India is in for a long period of high and stable growth. Aren’t market valuations on the higher side? Often P/E multiples for the entire market is looked at in order to get a regional perspective on valuations. This could be misleading. Rather it is the earnings — quality of earnings and the sustainability of the earnings growth — that is important. And for India, the story looks good ahead. For March 2008, consensus estimates put Indian corporate earnings to grow at 15% — an upgrade from the 12-13% levels expected three months back. In the past 12-18 months, there has been constant upgrade of earnings estimate. At the current juncture, the top two themes are ‘domestic consumption’ and ‘infrastructure’. Companies that fall under this category are expected to do well. Our top holdings in JF India Fund are Infosys (6.8%), Bharat Heavy Electricals (6.7%), ACC(6.1%), Bharti Airtel (5.7%) and Larsen & Toubro (5.2%). Our portfolio valuations, based on various metrics like P/E, P/B, are also at index averages. Why are you entering into the MF business in India? Increasing exposure to markets such as India is as essential to our business development as it is to our client’s portfolio performance. We are already among the top three investors in India, managing around $6 billion of India-dedicated offshore funds. We are already the fourth largest MF in China ($110 billion market). If we have to remain a leader in Asia, we have to be a leader in India. Our exposure to emerging markets began with the launch of Asia fund in 1971, followed by launch of global emerging market fund in 1990. What’s your current portfolio strategy for India investments? We typically use the proprietary model for doing the valuation exercise. India, at current valuations, is giving a larger landscape for stocks to be picked at attractive levels using the bottom-up approach. We maintain a concentrated portfolio — with portfolio turnover remaining below 30% pa. Our top 10 stocks for India-dedicated fund constituted 50% of overall portfolio.