Kristy Fong

The decline in NAV is compared to the MSCI India Index which dropped by 27.3%, both in sterling total return terms. 

The trust’s annual results also revealed that its share price total return had declined by 28.9%.

However, over the longer-term, taking the ten years to 31 July 2020, the share price increase is 90.5% as compared to the Benchmark’s increase of 55.6%, both in sterling total return terms.

Hasan Askari, chairman of the Aberdeen New India Investment Trust said that the economic costs of COVID-19 have yet to be fully recognised in India.

He said: “While the government’s stimulus was aimed mainly at the lower income groups that have been hit hardest, the initial response was somewhat underwhelming. This is partly because there are limits to how much further the government can loosen its fiscal purse strings, with its coffers already stretched heading into this crisis. Nonetheless, the government announced belatedly in mid-May 2020 a stimulus package to support small businesses and the rural economy.

“There were concerns that the lack of testing capacity could result in the under-reporting of actual infections which recognises that there was also a significant threat of a potentially wider spread as migrant workers returned to their villages from overcrowded cities.”

Mr Askari said that in light of this, the investment manager remains cautious on India’s ability to contain COVID-19, as well as manage the fallout, given the poor healthcare infrastructure. As a result, the manager remains watchful while regularly re-assessing the ability of the company’s underlying holdings to overcome COVID-19.

He added: “For the longer-term, India exhibits several structurally positive trends in its favour. Foremost, it is home to many of Asia’s most successful companies, a number of which have been stress-tested and have survived the previous economic and financial crises. It is also a beneficiary of a rapidly growing middle class that is both upwardly mobile as well as increasingly affluent. Meanwhile, with valuations now at compelling levels, there are opportunities for the manager to refine the portfolio.

“The manager’s focus is on selecting only the best companies which India has to offer: those with solid fundamentals, strong balance sheets with good earnings prospects together with experienced management teams that can deliver sustainable growth in the long term. Usually, these companies tend to be dominant in their respective sectors.

“This should benefit your company’s portfolio and position it well for the challenges ahead. Since the year end, it is pleasing to note that the company’s NAV per share, including income, has risen to 492.36p, as at 14 August 2020, being the latest practical date prior to the date of approval of this report.”

Kristy Fong, manager of Aberdeen New India Investment Trust, added: “We expect India’s stock market to stay volatile in the short term, with COVID-19 likely to hinder a global economic recovery. Worries over slowing domestic growth, as well as concerns over the liquidity and solvency of the non-bank financing sector, persist. The government’s commitment to protecting its sovereign debt rating by limiting its fiscal deficit has held back its infrastructure spending. The market awaits more reform to revive construction, industrial activity, employment and consumer demand.

“We select high quality companies with robust balance sheets and good management which should be able to weather the storm better than most. We have been more defensive in our recent portfolio positioning as we expect a more challenging post-pandemic outlook, yet opportunistic in adding to quality stocks that had been unduly punished when the market had sold off in March.

“The company remains focused on identifying companies which possess deep barriers to entry, clear earnings levers, and prudent capital management. We believe these holdings should deliver sustainable returns over time.”