Bull run, reforms give rise to India-focused funds

The bull run in the Indian equities coupled with the reforms push in areas like foreign direct investment (FDI) and goods and services tax (GST) have encouraged India-born investment and legal expert John Pereira to revive his India-focused fund in Australia.

The India Equity Fund, which was closed down in 2010 due to poor returns, is now being relaunched. Following its initial public offering which has just opened in Australia, India Fund is going to be the only Australia-listed investment company solely focused on India, according to the disclosure made by the fund. The company plans to raise about Australian $50 million and plans to invest in 50-70 stocks from 100 top large cap stocks.
The fund, to be listed by end-August on Australia's ASX, would be managed by Kotak Mahindra's UK subsidiary, the prospectus said, thereby teaming up again with Nitin Jain, Kotak's head of offshore long-only equities asset management based out of Singapore.

While there are several unlisted funds managed by houses like Fidelity, or listed Asia-focused funds like Platinum Asia and Ellerston Asia Investments offering exposure to Indian markets, India Fund would be the only India-focused listed opportunity. "India has recently undergone a dramatic political transformation in the wake of the election in 2014 of the government led by Prime Minister Narendra Modi. The Modi government was elected on the basis that it would deliver reforms to accelerate economic expansion and growth in financial markets. The government is in the process of implementing its reform agenda aimed at re-invigorating the Indian economy," Pereira has told his prospective investors in a letter.

Pereira, 53, started his career with ANZ Banking Group and had formed Alchemy Corporate Advisors to promote capital raising for small and mid-cap clients in 2001. He then went on to set up India Equities Fund, which was listed on Australian exchange ASX in 2007, but had to be closed down in 2010 due to underperformance. While financial advisors like Intelligent Investor have questioned the timing of the issue when Indian equities have already run up significantly, India Fund has also highlighted risk factors like failure of the government to deliver on its reform agenda.

"The successful delivery of the reformist policies of the current government is an important element in the expected economic growth of India. If the government is unable, for whatever reason, to continue implementation of its reform agenda, or if events transpired to undermine the policy changes being introduced, there is a risk that the country will not be able to deliver the expected economic returns," the fund said in its prospectus.