US Edition JP Morgan India IT
447p -2.2
Questor says BUY
Inflation is a real problem in these rapidly growing economies and there has been a series of interest rate rises to cool down runaway growth. In fact, the Indian central bank has pursued the most aggressive monetary tightening seen anywhere in Asia.
Growth this year is expected to come in at about 9pc, but the first half is expected to be slower.
High interest rates and rising input prices will crimp growth in the first six months.
Yesterday, it was revealed that India's industrial output growth slowed to 3.6pc in February, which is much lower than analysts had expected.
The figure for February last year was 15.1pc, but the country was emerging from the downturn at that time. Comparisons are going to remain tough all year.
But funds will continue to flow into markets like India, despite the inflation issue. Western economies are seeing some serious headwinds and high oil and commodity prices may see growth forecasts downgraded in these countries.
Emerging markets offer more attractive growth and, for foreign investors, India remains the hottest investment destination in the world after China.
The first three months of the year saw a large slump in foreign investment in India, but a recent report from broker Nomura predicted that foreign investment will be back at pre-financial crisis levels by next year.
However, the inflation issue must not be understated. According to the latest data from the Indian ministry of commerce and industry, food inflation for the week ended March 19 fell by one percentage point – although it still stood at 9.5pc. This is a serious issue for a country where more than 40pc of the population have to survive on $2 (£1.22) a day.
Shares in JP Morgan Investment Trust, which invests in major Indian companies, hit an all-time high of 502p in October last year, then fell by about £1, before recovering to their current level. Questor has recommended them as high as 463½p, some 4pc above the current share price, but remains unconcerned about the current volatility.
Indeed, any falls in this investment create a buying opportunity. This is not a trading play – it is a long-term strategic investment. The Indian growth story is based on increasing demand from growing wealth within the country rather than growth through exports. This is in contrast to China which has always been export-led, making it more dependent on foreign consumers. Any growth generated from inside India is more sustainable and it is this that makes the country's economic expansion more compelling.
This trend will continue and the slow and steady rise of the Indian economy will continue for some time to come. We will continue to see the volatility, but it is the long-term trend that matters.
The shares were first tipped at 224p on January 14, 2009, and they are now up 100pc from this time compared with the FTSE 100's gain of 45pc.
The shares remain a buy and a core portfolio holding.