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By:Rob Brewis, Director & Investment Manager, Aubrey Capital Management

Fresh back from a research visit, there is little doubt that India is among the best-managed large economies globally, with a humbling combination of ministerial and managerial competence. Real GDP growth is running at a healthy 7%, and inflation is under the RBI's target at about 3%. The fiscal deficit is declining, despite another round of sensible tax reforms, this time through a rationalisation of the Goods and Services Tax ("GST") system.

There are some complaints about lower nominal growth now that inflation has been tamed. While mathematically correct and clearly impacting company top line growth, this misses the broader point. With room to cut interest rates further, coupled with tax cuts, we suspect that today's nominal growth of 10% is the base, and upside from here is highly likely.

Indian companies are in particularly good shape, well-managed, and among the most innovative in our view. Valuations, stretched a year ago, have now consolidated and look more reasonable. Domestic fund flows remain supportive, especially through regular monthly savings schemes, although this is offset by a stream of new issuance through IPOs. Foreign flows remain the swing factor, and these, for the moment at least, are focused elsewhere. AI is the market focus today. While Taiwan and Korea produce the hardware and China is increasingly putting it to practical use, India is less of a natural bene......................

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