The market touched another record high
The Indian market was strong in November, and Carnegie Indienfond rose 5.3 percent.
The Indian stock market received record inflows of USD 6 billion in foreign capital in November. A rapid recovery in the Indian economy, coupled with increased risk appetite among global investors, led to returned optimism. In fact, the market reached a new all-time high at the end of the month.
Interest in investing in Asia is growing following the US presidential election. Biden in the White House opens up the possibility of better relations between the United States and China, even if trade tariffs do not change in the short term. It is also positive that the US is expected to resume cooperation on global environmental issues. Continued economic stimulus and support packages in the United States suggest a weakening of the dollar, which normally benefits the Asian economies as capital flows back in that direction.
Vaccine production for Covid-19 opens up the possibility of a cyclical recovery in global economic activity in 2021. Better worldwide growth also benefits Indian global export companies such as the IT service industry and subcontractors to the automotive industry.
After a time of increased protectionism under Trump’s administration, there is now a new trade agreement in Asia, with ten countries including China forming RCEP. India is not part of this agreement today, but expanded free trade and less protectionism favours global growth and leads to a more positive view of equity investments regardless of the market.
In India, banks, industrial companies and the cyclical sectors performed best this month. We have had a cautious attitude towards the banks, as there was a risk of increased bad debt losses, but this now looks like easing a little. The private banks are well-capitalised and have made large preventive write-downs. With the rapid recovery of the automotive sector, both in China and globally, Indian subcontractors are now running at full throttle. Motherson Sumi Systems, which we have in the portfolio, said at its recent strategy meeting that it has an ambition to grow both organically and through acquisitions, from a turnover of USD 9 billion to USD 36 billion over five years, with increased profitability.