Net Asset Value

7 November 2019

India Capital Growth Fund Limited (the "Company" or "ICGF")

Net Asset Value statement at 31 October 2019

Net Asset Value

The Company announces its Net Asset Value per share as at 31 October 2019 was 90.92 pence.

In October the Net Asset Value (NAV) was down 1.7% in Sterling terms, whilst the BSE Mid Cap TR Index was up 0.1%, delivering an under performance against the notional benchmark of 1.8%. In local currency terms, the NAV was up 3.4% for the month.

Portfolio update

Positive contribution to the portfolio's performance was driven by Berger Paints (up 21.2%), Yes Bank (up 70.1%) and Motherson Sumi (up 17.2%). The negative contribution mainly stemmed from Aurobindo Pharma (down 20.2%), Federal Bank (down 7.3%) and City Union Bank (down 3.1%).

Market and economic update

Indian equity markets continued to climb in October with the BSE Sensex and BSE MidCap Total Return indices up 3.8% and 5.4% respectively (in Indian Rupees) on the back of a thus far better than expected results season, encouraging consumer spending data over Diwali and a perceived reduction in geopolitical risk. Both foreign and domestic institutional equity investors were net buyers over the month to the tune of US$2bn and US$656m respectively. The Indian Rupee depreciated by 0.1% against the US Dollar and 5.3% against Pound Sterling.

On the macro front growth continues to deteriorate, reflected in reduced lending levels and slower industrial production. The Reserve Bank of India continues to be accommodative with another 25bps interest rate cut in October taking cumulative easing since February to 135bps. The central bank also sharply reduced its FY20 GDP growth forecast from 6.9% to 6.1%. However there is an expectation of the economy to start staging a recovery from the second half of FY20 as ongoing strength in central government expenditure, recently announced corporate tax rate cuts and monetary policy all take effect.

Indian companies began reporting their second quarter results (ending on 30 September). Across sectors, revenue, as expected, was impacted by a slowdown in demand however lower than expected raw material prices resulted in better than expected operating profits. The market took encouragement on the consumption front from hints of a recovery during the festival season. IT companies reported largely in-line whilst banks have witnessed a slowdown in credit growth mainly on the corporate side. However Net Interest Margins have expanded on the back of lower funding costs whilst asset quality has remained stable. The Real Estate, Telecom and the unsecured personal loan segments still remain vulnerable to further asset quality deterioration.