Fund Battle: are there alternatives to Jupiter India?

The Indian stock market is one of the hottest in the world right now. Investors are drawn to its democratic political system, large and young population, and its increasing importance as a manufacturing and investment hub due to political disputes with China.

The MSCI India index is up 228% over 10 years (to the beginning of July) but its growth has recently accelerated, returning 180% since April 2020, at the bottom of the Covid-19 induced crash.

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One fund has proven an incredibly popular and effective way of adding Indian shares to a portfolio: Jupiter India.

The £1.8 billion strategy, launched in 2008, has been a regular feature on our most-bought funds and investment trusts’ list over the past two years, even securing the top spot on a couple of occasions.

Strong returns explain its popularity. Managed by Avinash Vazirani since launch, who is based in India, it has returned 453% since 2008, compared with 343% for the typical Indian equities manager and 273% for the MSCI India index.

Performance is particularly impressive over the short term, returning 88% over the past two years, which is just under double the gain from the sector and index.

But Jupiter India is not the only way to invest in the market. We look at how it stacks up against rivals.

How does Jupiter India invest?

The portfolio is spread across a range of sectors, with the largest being financials, at 22% of the fund. Industrials, energy and then healthcare make up the next largest allocations.

Vazirani says that one important aspect distinguishing India from the US and Europe is the broad-based rise in stocks across sectors and categories.

This contrasts with the US, where a select few technology shares are pulling the entire market higher.

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Fund analyst Morningstar says that Jupiter India deploys a “growth at a reasonable price” investment process, meaning its portfolio is growing profits faster than its benchmark but the manager is conscious of overpaying.

The portfolio has just under half invested in small and mid-sized shares, showing that Vazirani attempts to find hidden gems in the market, rather than just picking the best-known and largest stocks.

The companies have on average higher earnings growth than that of the index, but Vazirani is also happy to hold cheap shares that could bounce back.

The largest positions are in tobacco company Godfrey Phillips India and oil companies Bharat Petroleum and Indian Oil Corp.

Despite excellent recent returns, Vazirani thinks India’s stock market’s best days are still ahead.

He says: “India’s economy is poised for robust growth, further bolstered by Modi’s re-election. India has just recorded the highest GDP growth rate globally, estimated at 8.2% for the fiscal year 2023-24. This remarkable feat is amid global economic uncertainties and is indicative of India’s strong economic fundamentals and effective policy measures.

“Additionally, Indian companies have reported record profits for the financial year ending 31 March, 2024. The combined net profit of Nifty 50 companies rose by 18% year-on-year, reflecting strong corporate performance.”

Which are its key rivals?

While Jupiter India is the most-popular India strategy among ii customers, it is not always the best performing.

Over 10 years, it is the fifth-ranked India fund out of 26. Stewart Investors Indian Subcontinent Sustainability, GS India Equity, Matthews India and Invesco India Equity have all returned more.

But over the past three years the strategy is unmatched – almost. One fund has returned more: Jupiter India Select, which is also run by Vazirani in a similar style. It has risen 99% compared with a 95% gain for Jupiter India.

The next best funds after three years are Nomura India (66.5% return), Liontrust India (65% return) and Invesco India Equity (64% return).

But return is not the only measure to look at when assessing a fund. Volatility is also key. Funds delivering a smooth ride generate strong returns without wild shot-term swings.  

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Over the past three years, data from Morningstar shows that Jupiter India’s Sharpe Ratio, which measures returns relative to volatility, is also among the highest available. This means the manager is likely making smart investment decisions by finding shares that are delivering top returns without much volatility.

Are there credible alternatives?

Two strong rivals to Jupiter India are Stewart Investors Indian Subcontinent Sustainable and Pacific Assets (LSE:PAC) Trust, which are both run by Edinburgh-based Stewart Investors.

This fund group’s approach is to find high-quality companies with sustainable and predictable businesses, and they put a lot of focus on the quality of the management team

Launched in 2006, Indian Subcontinent Sustainability invests in companies based in or having significant operations in India, Pakistan, Sri Lanka or Bangladesh. It has returned more than Jupiter India over the past decade, delivering a 319% gain compared with a 266% gain, but has not outperformed Jupiter India over shorter time periods.

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Pacific Assets is an investment trust that owns shares across Asia, excluding Japan. It has 43.5% in India and just 8.8% in China. It is on our ACE 40 list of sustainable fund ideas and while not a direct play on India, it is heavily influenced by performance of that market.

Dzmitry Lipski, head of funds research at interactive investor, says the trust has a preference for franchises with durable business models and high-integrity management teams, which has led it to own more in India than China.

There are also biases down the market-cap scale, towards the growth style and especially to quality metrics, he adds.

“In general, the fund’s best relative returns have come when the market has fallen, and conversely, the portfolio is expected to lag in momentum-driven markets, led by multiple expansion. Over recent years, the country bias has been a significant determinant of relative performance,” Lipski said.

For investors looking for emerging markets more generally, but with a bias to India, JPMorgan Emerging Markets Ord (LSE:JMG) Trust, which is also part of ii’s Super 60 list, is an option. It has 22.9% invested in India, including top-10 positions in Tata Consultancy Services and HDFC Bank Ltd ADR (NYSE:HDB).

However, the risk and return profile of Jupiter India shows why it is such a popular option for UK-based investors to access the booming emerging market. In my view, the 0.99% ongoing annual fee for the I Class units looks like a price worth paying to invest alongside an experienced and talented fund manager.