After several years of rising valuations that boosted equity market returns, the Indian equity market declined in 2025 and underperformed the broader emerging markets index. However, JIGI’s portfolio managers see reasons to be optimistic, and continue to find attractive companies that have the potential to capture India’s long-term growth prospects.

Slower growth, lower valuations

India’s economy rebounded sharply following the pandemic, with rapidly rising corporate earnings expectations sending valuations soaring, particularly for small and mid cap stocks.

That strong growth has slowed to a mid-cycle pause while the impact of US tariffs has been a further headwind. India’s economy is also less exposed to the artificial intelligence (AI) supply chain compared to other emerging market countries, which are home to companies that make critical hardware for the global data centre buildout.

As a result, the Indian equity market has been somewhat rangebound for over a year now, and the valuation premium for large cap Indian stocks has come back down to the normalised level of the past 10 years.

However, the Indian economy is still on track to be one of the fastest growing larger economies over the coming years and several factors are supportive for further expansion. First, the government has been financially conservative, but the focus is now changing to stimulate consumption through measures including tax cuts. Second, corporate capital expenditure (capex) is expected to increase from decade low levels, with companies expected to increase their spending as they become more confident in demand.

And finally, as India’s economy transitions, its equity market is also changing. For example, as foreign investors reduced exposure to Indian equities over the past year, domestic flows into mutual funds more than absorbed the selling. India has become a lower-beta equity market with less volatility and more sticky domestic flows, all of which should support it in the future.

Positioning for a changing market

JIGI has typically had higher exposure to the financial services companies, IT outsourcing and consumer staples businesses, which have offered core quality growth. Financials are still the largest overweight but diversified by insurance, diversified financials and banks.

ICICI bank, one of largest private banks in India, remains a key holding. The bank has gone through a management change that significantly improved its operating performance, focusing more on profits vs. revenues. Max Financial, one of the top life insurance companies in India, is a new position in this more defensive area of the financials sector. The company is attractively valued and has strong potential to gain market share from state-owned life insurers, with market-leading positions prudent risk management.

Several positions in financials also contributed positively to JIGI’s returns in 2025, including Multi Commodity Exchange, India’s largest exchange for commodity derivatives, and Cholamandalam Investment & Financial, a company that specialises in automobile loans.

JIGI holds several IT outsourcing companies, which have generally lagged other areas of technology that are more immediately exposed to AI investment and the buildout of data centres. Importantly, the portfolio managers believe that as the AI wave moves from supply to demand, IT services companies will play a key role in implementing AI across the corporate sector. The portfolio holds positions in Corforge, TCS, ExlService.

While JIGI has owned a number of consumer staples stocks, including Hindustan Unliever and ITC, the portfolio managers have started to add more to consumer discretionary holdings, such as automaker Mahindra & Mahindra and online travel company Makemy Trip. However, the portfolio sold its position in Bajaj Auto company, which was losing market share, and reduced its position in Vishal Mega Mart after a sharp rally in the stock price following the initial public offering.

JIGI is also adding to companies that could benefit from further cyclical broadening, such as CG Power and Blue Star, a home appliances company. In the health care sector, the portfolio managers added to the position in Dr. Reddy’s, a pharmaceutical company that sells affordable generic drugs and has a generic version of Ozempic, the high-profile weight loss and diabetes drug, in its pipeline.

Looking ahead

Over the past year, cyclical value has continued to outperform quality, and valuations are still relatively high in small and mid cap stocks; both of these factors have been headwinds to JIGI’s strategy. However, valuations have come down across the broader Indian market and the structural drivers of India’s long-term growth are still firmly in place. As economic growth picks up, JIGI’s portfolio managers are confident that they will be able to find high quality businesses, led by outstanding management teams that trade at reasonable valuations.

The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.

Past performance is not a reliable indicator of current and future results.
Opinions, estimates, forecasts, projections and statements of financial market trends are based on market conditions at the date of the publication, constitute our judgment and are subject to change without notice. There can be no guarantee they will be met.
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Summary Risk Indicator

The risk indicator assumes you keep the product for 5 year(s). The risk of the product may be significantly higher if held for less than the recommended holding period.

Investment Objective: 

Aims to provide capital growth from Indian investments by outperforming the MSCI India Index. The Company will invest in a diversified portfolio of quoted Indian companies and companies that earn a material part of their revenues from India. The Company will not invest in other countries of the Indian sub continent including Sri Lanka. The Company has the ability to use borrowing to gear the portfolio to up to 15% of net assets where appropriate.

Risk Profile:

Exchange rate changes may cause the value of underlying overseas investments to go down as well as up.

Investments in emerging markets may involve a higher element of risk due to political and economic instability and underdeveloped markets and systems. Shares may also be traded less frequently than those on established markets. This means that there may be difficulty in both buying and selling shares and individual share prices may be subject to short-term price fluctuations.

External factors may cause an entire asset class to decline in value. Prices and values of all shares or all bonds and income could decline at the same time, or fluctuate in response to the performance of individual companies and general market conditions.

This Company may utilise gearing (borrowing) which will exaggerate market movements both up and down.

This Company may also invest in smaller companies which may increase its risk profile.

The share price may trade at a discount to the Net Asset Value of the Company.

The single market in which the Company primarily invests, in this case India, may be subject to particular political and economic risks and, as a result, the Company may be more volatile than more broadly diversified companies.