This rating and report were issued for a different share class of this fund. The performance and fee structure of this class may vary from that referenced.
HSBC GIF India Equity has merit for investors with the patience to endure its volatility.
The Singapore-based manager and supporting team is one of this fund’s strengths. Sanjiv Duggal has been at the helm here since 1996, which shows a strong commitment to his investors. He also has the support of a close-knit team of two managers in Viresh Mehta and Nilang Mehta and an analyst in Divya Balakrishnan. Analyst Deborah Yeo left recently but overall the team has gained resources as they now work closely with HSBC’s India-based analysts. The teams are moving to a model of joint research, but the team will be directing the research effort in line with their strategy.
The process blends top-down calls and stock selection. At the top-down level they examine where they are in the cycle and attempt to forecast macroeconomic trends and identify inflexion points, some of which may occur due to changes in government policy and regulation. Once they have formulated a top-down view they target the beneficiaries of those trends on an 18- to 30-month view, which typically aids their sector selection. They then screen for stocks that look attractively valued--based on metrics such as ROE and EV/EBITDA--while their qualitative overlay attempts to eliminate those with unquantifiable risks such as poor management.
The fund’s near-term performance has been disappointing, particularly in 2010 and 2011. The manager avoided the big index stocks as he believed they were overvalued, but they continued rising. When the market reverted to stocks with cheaper valuations in early 2012, the fund benefitted, as we would expect. However, the team has recently introduced stock limits of +/-500bps (relative to the benchmark), which they will implement by the end of 2012. This still leaves the managers with the flexibility they enjoy but should help temper the underperformance when the index heavyweights rally.
Despite the recent underperformance, we believe the highly experienced manager and proven strategy over the long term make this fund a good choice for Indian equity exposure. The fund retains our Bronze rating.
Morningstar Analyst Rating™
Niche Player. Given the risks of narrow single-country funds and of the Indian equity market, this offering should be kept to a small portion of a broader portfolio.
Duggal is a seasoned manager who has the support of a close-knit team and HBSC's wider resources.
HSBC Global Asset Management has strong resources dedicated to emerging markets.
The manager and his team blend top-down analysis with bottom-up stock selection.
The fund has struggled in the short term but long-term returns remain strong.
This offering is competitively priced relative to peers.
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