Navigating the nuances of Indian equities

The Indian equity market has been one of the top performing major equity markets over the last five years. However, accessing the returns of Indian equities requires a strong knowledge of the local market, including tax implications and the ability to consider valuations in the context of economic growth, corporate profitability and domestic trends.

Local expertise backed by global resource

JPMorgan India Growth & Income plc (JIGI) has outperformed the MSCI India Index over one year to 31 August 2025, and is slightly behind the benchmark since the current team took over portfolio management of the trust three years ago (although it has outperformed the iShares MSCI India ETF, which is a reasonable proxy for a benchmark, as ETFs must pay the same capital gains taxes that are applied to sales of shares in India).

The performance reflects the team’s focus on implementing the investment process with a local perspective. JIGI has a dedicated team based in Mumbai that works closely with J.P. Morgan Asset Management’s global sector experts. The local team has helped generate significantly more small and mid cap ideas for the portfolio, which are helping to boost returns. Corforge and EXLService, both business processing companies, are also smaller companies and top contributors to returns for the 12 months ending 31 August 2025.

Many of these small and mid cap companies have been driving the performance of the Indian equity market and some valuations have begun to look stretched. That’s been the rationale behind some recent sales or trims in the portfolio. The investment team bought Vishal Megamart on its initial public offering (IPO). The company is a value retailer and excellent operator but investor enthusiasm pushed the valuation to unrealistic levels and the team decided to take profits and exit the position. JIGI also trimmed its position in Colgate, another mid cap company, due to its high valuation. The team is actively looking to add small and mid cap positions on any correction to valuations.

Returns from across the Indian market

Currently about 25% of the portfolio is invested in small and mid cap stocks and 10% of the holdings are higher risk-reward ideas. The majority of the portfolio—about 65%—is invested in what the team refers to as long-term compounders. These are generally large companies with strong established businesses and good visibility on earnings, spanning a wide variety of sectors. Multi Commodity Exchange, an online platform for trading commodities derivatives, Mahindra & Mahindra, a maker of light trucks with a top market share in SUVs, and ICICI Bank, the best performing bank in India, were among the top contributors to the portfolio’s performance over the past 12 months through 31 August 2025.

Mahindra & Mahindra and ICICI Bank remain two of the largest active positions in JIGI. Dr. Reddys, a pharmaceutical firm manufacturing the first wave of GLP-1 generics, is a recent addition and now the largest active weight in the portfolio.

Consider valuations in the context

The strong performance of India’s equity market reflects the country’s recent strong economic growth, especially compared to China’s sluggish economy. Indian companies also have the highest an average ROE among major economies, including the US. These factors have driven Indian equities to record valuations in recent years. However, India’s economic growth has recently slowed is likely to stabilize at a more sustainable 6% – 7% going forward—still among the fastest growing in the world. Valuations are still above median but have come down to more reasonable levels, especially outside of small and mid cap stocks.

Domestic flows in India also providing an additional layer of support to the equity market. Household savings are moving out of deposits and traditional assets, such as gold and real estate, into equities.

Although the JIGI portfolio managers believe the valuations are generally justified, higher-than-average valuations are a risk factor for Indian equities. Macroeconomic factors present another risk. For example, tariffs from the US were the key driver a sharp decline in Tata Motors’ stock, which was one of the largest detractors from JIGI’s performance in the past 12 months.

Looking ahead

JIGI, the largest investment trust focused on Indian equities¹, has adopted an enhanced dividend policy to pay out 4% of NAV annually², which is reflected in the name change to JPMorgan India Growth & Income plc. The portfolio managers continue to believe that India has a strong structural growth story with many drivers and see any correction in Indian equities as an opportunity to add high quality businesses to the portfolio.

¹ Association of Investment Companies, Indian Sub-Continent Sector, as at October 2025

² Dividend paid by the product may exceed the gains of the product, resulting in erosion of the capital invested. It may not be possible to maintain dividend payments indefinitely and the value of your investment could ultimately be reduced to zero. Dividend payments are not guaranteed.

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

The portfolio is actively managed. Holdings, sector weights, allocations and leverage, as applicable, are subject to change at the discretion of the investment manager without notice

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.