abrdn New India 30 September 2024

abrdn New India (ANII) offers investors exposure to a portfolio of high-quality companies that managers James Thom and Rita Tahilramani believe can benefit from the long-term growth trends of the Indian economy. Rita has recently stepped up to an investment management role following the departure of former manager Kristy Fong in September 2024. Both James and Rita are part of the broader abrdn Asian Equities Team which supports the strategy (see Management).

ANII has enjoyed a return to form in the past 12 months, delivering strong outperformance of the benchmark as well as being one of the top performers amongst peers in the past year. This reverses a challenging period in which the managers’ quality focus has steered them away from stocks with questionable governance, though this has subsequently proved beneficial as issues have now emerged which weighed on share prices (see Performance).

The managers have been more decisive when constructing the Portfolio, ensuring it reflects their highest conviction ideas. Whilst they continue to have a bottom-up approach, James and Rita have overlayed a sense check to ensure their portfolio accurately reflects what themes they believe will perform well. This re-focus has been beneficial to performance with holdings they have added to performing well whilst recently sold positions (or those they do not own) have fallen back, supporting the relative outperformance.

This strong near-term performance has not been reflected in the share price though, leading to the trust trading at a wide Discount to NAV. The current level is wider than the trust’s own five-year average and wider than peers. The board has been active in trying to narrow this by undertaking significant share buybacks.

India has been one of the best-performing stock markets for a number of years, driven by strong demographics and a reform-focussed government. ANII has harnessed this to deliver strong absolute returns over the long term, with a five-year NAV return of c. 80%.

More recently, relative Performance has been very strong, with the trust outperforming both its benchmark and peers over the past year. This performance has been supported by decisions made across the portfolio, including increasing conviction in long-standing positions and backing smaller companies despite being off benchmark. Furthermore, the managers’ decision to sell stocks where conviction has fallen has also helped relative performance after they subsequently struggled. We believe this is a testament to the strength of the approach, supported by the successful abrdn Asian Equities Team and is encouraging for the trust’s outlook.

Despite this pickup in recent performance, the shares continue to trade at a wide Discount to NAV. We believe this not only makes ANII a very competitive option versus its peer group which trades on average much narrower, but also could provide investors access to the Indian market at an effective discounted level. The success of the country’s stock market has led to questions over valuations, however with ANII trading at a significant discount, it could be seen as a way of mitigating this risk, in our opinion.