Mixed impressions from India trip

The Indian market was very strong in September. Carnegie Indienfond rose 7 percent.

A week-long trip to India and meetings with 20 companies left a mixed impression. The economy is now growing by only 5 percent at GDP level, and some industries are showing clear signs of a slowdown.

Demand for capital goods has declined over the past six months, for a number of reasons. Many decisions on investment and consumption were postponed during the spring, pending the outcome of the election. Lower grain prices and weaker income growth for farmers mean weaker demand from rural areas.

The impact of last year’s liquidity crisis for finance companies have become increasingly evident this year as finance companies with lower ratings are finding it difficult to roll out their financing in the market.

The result is obvious when you look at sales for the country’s largest manufacturer of small cars, Maruti Suzuki, which fell 32 percent in August. Lower capacity utilisation for manufacturing industries means that redundant staff are being laid off. Banks are warning of bad debt losses for private customers and consumption is rising.

Despite the harsh climate, it is becoming clear that the best companies with dominant market shares and good management continue to do well. Several of the companies in our portfolio are showing good trends in both sales and profits. Companies with weak profitability, poor market positions or overly high debt are being eliminated. The government’s attitude also seems to be that any that cannot cope with their borrowing should not be saved by the state banks. This creates problems in the short term, but means an increased element of market economics in India, which is a good thing.

The government came up with a strong stimulus package in which the corporate tax rate is reduced from 35 percent to 25 percent. Investments in new capacity are taxed at only 17 percent and the net effect is that company profits will increase by 8 percentage points.


During the month, the fund sold its holding in Icici Bank. A new investment was made in Colgate India.

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Carnegie Indienfond erbjuder exponering mot en av världens mest spännande tillväxtmarknader. Indien har det senaste decenniet etablerat sig som en ekonomisk stormakt med oerhört hög tillväxt. Landet har goda förutsättningar att...

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