Alternative Market Briefing

Agra India Fund up 7.41% YTD, managers say while fundamental outlooks remain good, debt stress to continue

Monday, August 27, 2007

The Agra India Fund, which is run on the London based platform of PCE Investors Ltd., returned 1.71% in July, bringing the YTD to 7.41%. The fund runs a "fundamental bottom-up strategy with a top-down volatility control and technical overlay" and has $21m in AUM.

Managers Sanjiv Shah and Vijay Krishna-Kumar pointed out in an investor communication obtained by Opalesque "it is worth repeating that:

India has a very small (though fast growing) mortgage market, estimated at only roughly 3% of GDP.
Personal debt to GDP is low, there is no sub-prime mortgage market and there is insignificant exposure on the part of Indian financial institutions to US CDOs.
Liquidity in the internal banking system remains healthy, call money market rates throughout July remained well below a high of 4.75%.
India’s foreign exchange reserves of roughly $229bn sit amidst Asian Central Banks’ roughly $6.6tn war chest. Asia is a very different place since the Asian crisis of ’97, albeit for the most part still exposed to a US slowdown.

" However, while the fundamental outlook remains very good, "the Indian market is unlikely to the master of its own destiny in the next few weeks. While the crisis in the global credit markets may have been eased by the decision of the US Fed to cut the discount rate by 50 bps, significant risks remain. The debt fuelled boom in many developed economies has been driven by a long period of easy credit and very lax lending criteria and it is un......................

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