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Summary
Fund activity
During the course of the month we sold the entire position of Tata Motors following a bounce back off recent lows. The weak sterling and perceived slowness in the hybrid space have hampered the company in recent quarters, in spite of new releases such as the Jaguar E-Pace and the new Range Rover Velar.
We have also cut Lupin, the pharmaceutical company. This has been an underperformer over the year, and the loss of exclusivity of one of its products further weakens the outlook for the stock, and thus the small remaining position was sold. Following the sale, the stock fell further after the US regulator identified new issues in their production facilities.
Tech Mahindra, an IT stock was also sold over the month having rebounded off recent support levels. Lower organic growth prospects and greater client risks moving forward, coupled with issues in their telecom segment have resulted in our profit-taking in this holding.
Funds raised were allocated to existing holdings, including the recently acquired Dixon Technologies. In addition, the fund was successful in securing a much sought after allocation in Godrej Agrovet’s IPO anchor book, which forms part of the formidable Godrej stable of companies.
Outlook
The recapitalisation and the infrastructure investment clearly demonstrate Prime Minister Modi is advancing a pro-growth agenda in the run up to the national elections in 2019. Modi will be seeking to ensure momentum begins building in the upcoming state elections in Gujarat and Himachal Pradesh, thus we can expect further supportive measures to follow.
Modi recognises the importance of delivering jobs, particularly in the period running up to the election. Road building is hugely labour intensive and we expect Modi to continue rolling out highly job-creative plans in the coming quarters. Housing construction is another area that will benefit greatly from further investment, leading to greater employment. We are invested in stocks tied into this theme.
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