Liontrust India Fund

Q4 2019 review

Over the fourth quarter, the Liontrust India Fund returned -1.6%*, ahead of the MSCI India Index’s -2.0% loss.


Market Overview


The fourth quarter witnessed a general rally in global markets driven by an improving global economic outlook and increased risk appetite – emerging markets in particular enjoyed a robust quarter, outperforming developed markets having lagged for much of the year hitherto. However, India proved to be something of a laggard amongst emerging market peers in both the final quarter and 2019 as a whole. Markets in general were buoyed by a number of positive catalysts, including further expectations of thawing relations between the US and China over their long-lasting trade spat, with expectations of a preliminary deal early in 2020 (now in effect), as well as improving sentiment surrounding global economic growth in general supported by ongoing loose global monetary policy and extremely low inflation. It was also helpful for emerging markets that the US dollar was weaker over the period as dollar strength has been a major headwind for the asset class since its inflection point in early 2018. That being said, India remains a market that tends to be relatively insulated from external economic events and as such was to a degree bypassed by investors looking for more cyclical markets that might benefit from the improving economic outlook. India itself continued to see a slowing growth trajectory that has weighed on corporate earnings throughout 2019. Moreover, optimism surrounding the re-election of Modi and the generally pro-business BJP party gave way to a more cautious outlook as the government pursued a politically divisive agenda including the Citizenship Amendment Bill, leading to protests across the country. The BJP party also saw reversals in local elections in Jharkhand and Maharashtra.


Portfolio Attribution


The Indian market ultimately lagged both emerging markets and developed markets over the fourth quarter. US dollar returns were also hampered by the fact the Indian rupee missed out on the rally against the dollar that many emerging markets enjoyed, boosting returns for offshore investors. Whilst the political developments mentioned provide part of the reason, the steady rise in crude oil prices through the quarter also weighed on India from a macro perspective (India remains one of the most sensitive markets to higher oil prices). Through the quarter, the best performing areas of the market were those more exposed to global conditions (energy and materials), as well as financials. However, the stand-out sector was telecoms, where government decisions that had been pending for some time came through positively for the sector, providing by far the best share price returns in an area that has otherwise been under pressure through the year. Meanwhile, the weakest sector was industrials, where ongoing economic weakness in the Indian economy continued to take its toll on the earnings outlook for companies linked to the domestic investment cycle.


The Fund benefited on a relative basis from an underweight position in the consumer staples sector, which proved one of the weakest areas of the market – with our one holding in that area, Godrej Consumer, also outperforming comparable companies. The Fund also benefited from stock selection in the healthcare sector, where all 3 holdings produced positive returns in a sector that on average finished the quarter underwater. Consumer discretionary also provided support to returns, especially from our position in auto-component manufacturer Motherson Sumi, which enjoyed a very strong quarter on the back of stabilising perceptions over the health of the auto market in India. The major offsetting sector in terms of performance was industrials where a position in solar engineering firm Sterling Wilson was hit extremely hard when promoters failed to repay a loan on schedule.




Although India’s low sensitivity to global macro events has seen it lag somewhat in 2019, we remain positive on the outlook for a domestic economic recovery in 2020 and as such have made no significant changes to the portfolio in the quarter.   


Discrete years' performance** (%), to previous quarter-end:







Liontrust India C Acc






MSCI India






IA Specialist







*Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)


**Source: Financial Express, as at 31.12.2019, total return (net of fees and income reinvested)


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Key Risks

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. Investment in funds managed by the Global Equity (GE) team may involve investment in smaller companies - these stocks may be less liquid and the price swings greater than those in, for example, larger companies. Investment in funds managed by the GE team may involve foreign currencies and may be subject to fluctuations in value due to movements in exchange rates. The team may invest in emerging markets/soft currencies or in financial derivative instruments, both of which may have the effect of increasing volatility. Some of the funds managed by the GE team hold a concentrated portfolio of stocks, meaning that if the price of one of these stocks should move significantly, this may have a notable effect on the value of that portfolio.


The information and opinions provided should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Friday, January 24, 2020, 9:49 AM