SINGAPORE (May 28): The Tantallon India Fund closed up +3.20% in April, after expenses. The headlines remain feverish: from hand-wringing on US dollar strength (or not) to the mind-numbing rhetoric across every conceivable media platform on protectionism, retaliatory tariffs, customs unions, energy prices, non-trade sanctions on corporations/individuals and potential peace treaties, to the hypersensitivity in equity, fixed income and currency markets to data that might (or not) reinforce views on the “gradual” tightening of monetary policy globally.

Thankfully, from our perspective, sustained flows into domestic Indian retail equity mutual funds continue to be validated by a very strong earnings season and, in particular, for our portfolio holdings. We are most “differentiated” from the more cautious market commentaries that are making the rounds in our explicit view on the Indian earnings cycle having decisively inflected.

Continuing to meet with companies across sectors and across the market cap spectrum, looking to test/re-validate our assumptions on volume growth, pricing and margins, we would like to highlight the following:

  • Services, private sector financials, cement, steel, passenger and commercial vehicles, tourism, infrastructure, specialty chemicals, logistics, renewables, agriculture and niche IT services are seeing strong sequential growth, a sustained recovery in demand and resilience in pricing/margins;
  • Production capacities are stretched, and as utilisation rates rise, we believe we are on the cusp of a new, extended investment cycle;
  • Domestic consumption and tourism trends are particularly robust, highlighted by the upcoming school holiday travel advance bookings and very strong volume guidance from the fast-moving consumer goods companies who have reported thus far;
  • The private sector financial services companies have transitioned seamlessly to scalable digital platforms and continue to take market share away from the capital-­constrained, legacy, public sector banks; and
  • Potential points of stress: (i) noisy politics and regional elections might make Prime Minister Narendra Modi more populist in the lead-up to the national elections (he has been remarkably disciplined thus far); (ii) high crude price impacting the current and fiscal deficits, raising the risk of higher interest rates; and (iii) new job creation is still lagging (12 million new jobs created over the last 12 months versus 21 million kids having just turned 20 this past year).

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