US Edition JP Morgan India Investment Trust
377.1p +5.1
Questor says BUY
India's monsoon season was the weakest in more than 30 years – and the country's economy is highly reliant on the rains. India is still, essentially, an agricultural economy and the monsoons are the main form of irrigation for its farmers – all 235m of them, supporting a rural economy of 724m people.
That's why Questor downgraded the stance on JP Morgan's India Investment Trust to hold from buy at the start of August. The lack of rain brought a strong degree of economic risk to the country – and its stock market.
Rainfall in the quarter to September 30 was 23pc below period average – the worst rainfall performance since 1972. The lack of rain in India – and the consequent crop failures – was one of the main reasons that sugar jumped to a 28-year high in early September.
However, rains did return later in the season and the government is now pushing to save winter crops.
It also appears that Indian government action is counteracting any negative effects of problems in the agricultural sector, which actually represents a major milestone for the country in terms of development. Figures out yesterday for the country's August industrial production were much better than anyone expected.
Industrial output surged by 10.4pc in August, which should help offset the fall in agricultural output. There was a slight wobble in the Indian stock market during the dry monsoon, but everything now appears to be back on track.
The government now forecasts that the economy will expand by 6.3pc-6.5pc in the year to March 2010. This is below the average growth rate of 8.7pc over the last four years, but it is still an enviable rate of growth when viewed from the UK. Manmohan Singh, India's newly-elected prime minister, said on Saturday that he thought that the worst phase for the economy was over. Of course, a politician's musings on the state of his country's economy cannot be taken as read, but his view is backed up by some positive economic data over the last month.
Also, inward investment is increasing. Foreigners have bought $12.8bn (£8.1bn) of Indian shares so far this year, including about $4bn in September. This has almost reversed the net outflow of more than $13bn seen last year amid the global crisis.
The most important thing to remember about the Indian economy that distinguishes it above other fledgling economies is that growth is driven by domestic demand, not exports. This has short-term problems but long-term benefits.
Unlike countries such as China, the country has a current account deficit, not a surplus, albeit a modest one. Last year's current account deficit stood at about 2.6pc of GDP. But an economy supported by domestic demand can grow with relative stability.
Some economists have suggested that growth may outstrip that in China over the next few years, as major exporting countries are still hampered by the slowdown in global trade.
Questor has recommended this fund on a number of occasions, starting at 224p on January 14. The hold stance was placed on the shares at 320p on August 19, but the country's economy appears to have bounced back from the poor rains and the fund is 68pc ahead. The latest net asset value per share figure on a fully-diluted basis is 387.17p a share.
This investment trust remains a core long-term holding in the Questor portfolio and the rating is moved back to buy from hold.
A share club of which Garry White is a member owns 955 shares in JP Morgan Indian Investment Trust.
Templeton Emerging Markets
502½p +12½
Questor says BUY
Emerging market equity indices are now halfway back towards their all-time highs. Mark Mobius, chairman of Templeton Asset Management, thinks that old high will be surpassed, albeit with the caveat that there will be corrections on the way.
As this emerging markets fund is one of the most important in the Templeton stable, you might well think that he would say that, wouldn't he?
However, Questor is actually of the same view. Developed markets are going to be suffering for quite some time from high personal debt, bad debts and low employment.
Prospects in emerging economies all over the world are also significantly better than here in the UK, because they are starting from a lower base.
With the establishment of organisations such as the G20, emerging economies are now getting to play their part in the global decision-making process. Indeed, the level of volatility in developed markets could outstrip that of the emergent economies over the next few years.
Questor also put a hold rating on shares in the Templeton Emerging Market Investment Trust at the start of August, fearing a September correction. This has not materialised, and the shares have continued to move ahead.
Although there is still a risk of a correction, data from the fund's markets have been reassuring. The shares were recommended as a buy on January 5 at 284p and downgraded to a hold on August 11 at 413p. The shares are up 77pc since they were first recommended and the stance is now returned to buy.
Questor believes that this fund should also be regarded as a long-term core holding in your portfolio.