Large inflow of international capital to India

The market was characterised by increased global optimism following November’s US presidential election. The news that several vaccines had been approved came at the same time, which meant that the willingness to invest in India and emerging markets returned and we saw a large inflow of international capital to India in December. The stock market has in a very short time factored in a strong cyclical recovery in global growth for the coming years.

Commodity companies, cyclical industrials and banks were the sectors that rose the most in December. The automotive sector also performed strongly this month, with an increased need for transport, trucks and components. Defensive industries like pharmaceuticals, groceries and telecommunications were weaker.

The fund has no investments in coal extraction or in steel production. On the other hand, we have investments in cement companies that benefit when the state expands infrastructure. The holdings in Asia Paint, which manufactures house paint, and Kansai Nerolac Paint, which manufactures automotive paints, have developed strongly during the autumn.

The fund also has a holding in Hindalco Industries. Hindalco owns Novelis in the USA, which manufactures aluminium for vehicles and for packaging consumer goods (cans). I met with this company in December to discuss its environmental impact. It is actively working to reduce its emissions and to improve production efficiency. In the American operations, 60 percent of the raw material is recycled, which means that energy consumption in production is 90 percent lower than for starting with new material. A greater focus on light materials such as aluminium for electric vehicles is the most important driving force for increased demand.

During the month, the fund invested in Bharat Forge, which manufactures cast metal components for the automotive market, such as drive shafts. The US market for heavy trucks is now showing clear signs of increased demand following the past year’s closed economy. The holding in Nestle India was reduced.