16 Jan 2013
The Finance Minister’s determination to hold the FY13 fiscal deficit to 5.3% continues to generate interest as ratings agencies sharpen their pencils for forthcoming budget. The latest move appears to be a calculated effort to cut the fuel subsidy burden by introducing differentiated pricing for bulk buyers, about 18% of total demand: this market segment is to be charged full market pricing. A second leg of this effort may be more difficult to sustain: rumoured modest monthly retail price increases over a 15 to 18 month period to eliminate the differential. The Prime Minister has given his support by emphasizing that the government must gradually increase energy prices because they can no longer be held at such a low level relative to international markets. In an extraordinary move within six weeks of the annual Railways budget, all passenger tariffs have been increased by 21% with effect from January 21st. They have not been increased for ten years and an attempt to do so last year cost the cabinet minister his job; the difference this year is that the minister in question is from Congress, rather than a coalition ally. The benefit of the increase will be a reduction of about $1bn in the railways’ deficit. Read Ian's full weekly commentary here.
11 Jan 2013
6 Jan 2013
4 Jan 2013
Himalayan Fund has experienced underperformance this year and the Board has addressed this by changing the operating structure to cut costs and introduce greater efficiency into the investment process. Following these changes, we have adjusted the portfolio to better align it with the outlook for the next twelve months. The odds favour an extended period of policy rate cuts as the RBI has disclosed that promotion of economic growth should now take priority. In India, a monetary easing cycle is closely correlated with stock market performance and we believe the Fund is now positioned to outperform in that context, with good exposure to high-quality financial stocks, overweight positions in pharmaceuticals and consumer orientated stocks and quality exposures to stocks likely to benefit from a recovery in infrastructure investment projects. We expect to generate excellent returns in 2013.