India is battling headwinds
The Indian market underperformed the rest of Asia in December. Carnegie Indienfond fell 0.8 percent.
Asian stock exchanges were traded up this month as risk appetite swelled after China and the US agreed a “phase one” trade deal. The agreement includes increased Chinese purchases of US grain products, protection of patents and technology transfer, and a liberalisation of Chinese financial markets.
In return, the US will refrain from upping import tariffs on Chinese goods. The 15 percent import duties introduced in September are halved to 7.5 percent on imported goods worth USD 120 billion. This obviously benefits China the most.
India, on the other hand, is battling headwinds with weaker economic growth, and GDP growth was revised down to 5.5 percent for 2020. Expectations of stimulus from lower interest rates failed to materialise, and the RBI chose to keep rates unchanged in December. On the domestic policy front, there is an impression that Narendra Modi is struggling with his ambition to fundamentally change the country. The problem is that the measures are largely in a direction that is failing to appeal to public opinion.
A bill was recently passed offering Indian citizenship to immigrants to India from Pakistan, Bangladesh and Afghanistan before 2015. All religions are welcomed except Muslims, which is controversial given that about 30 percent of the population is Muslim. Modi leads a Hindu nationalist party previously accused of persecuting Muslim minority groups in the country, which has led to riots and massive demonstrations. The BJP and Narendra Modi are now at risk of losing power in several future state elections, which could undermine his reform policies.
The fund invested this month in Motherson Sumi Systems, a manufacturer of electrical wiring and moulded plastic components for numerous global car brands. An investment was also made in Icici Bank. We chose to reduce our holding in Reliance Industries after the share rose steeply in the autumn.