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"Our experience shows that over the last 5 years, by employing unconstrained, bottom-up individual stock selection, it is possible to outperform the market significantly. India offers an attractive opportunity for long-term investors willing to live with some volatility," commented Arun Agarwal, MD, Altavista Investment Management. Since inception in March 2011, a fully invested long book would have returned 18% p.a. in dollar terms compared to the Indian market which returned 3.9% p.a. in the same period.

The Modi government's recent reforms; the introduction of the Goods and Services Tax (GST), banking reforms and demonetisation all bode well for India's long-term tax to GDP levels, fiscal deficit, interest rates and reviving the investment cycle. Corporate profitability is at cyclical lows currently with corporate profit to GDP at 3.9% vs a historical average of 5.4% and a peak of 7.8% while corporate ROE is at 14% compared to the historical average of 20% and a peak of 26%. This should lead to corporate profits growing faster than nominal GDP.

Agarwal and Nair, who already manage the $55m AVCIF long/short India Fund, believe an unconstrained approach allows them to go where the opportunity arises.

"We look for 3-4 compelling opportunities every year - high quality businesses/ sectors which are out of favour. We are long term investors and are willing to trade near term uncertainty for long term potential. For example, currently, despite the recent run up in the Indian markets, the Pharma, Telecoms and IT services sectors have lagged significantly and are trading significantly below historical multiples. Our research efforts are currently focused on these sectors," added Vinod Nair, MD, Altavista Investment Management.

Altavista Investment Management, which was founded in 2007, is an investment manager based in London. The firm, which has approximately USD 272 million in assets under management, manages the Altavista Global Equity Fund and the Altavista Capital India Fund. The firm is authorised and regulated by the Financial Conduct Authority.