Manish Bhatia, manager of Luxembourg-based Schroders Indian Equity fund says a more sustainable rebound in the second half of 2012 is likely.
Bhatia states looking back over the course of 2011, whatever could go wrong with the economy did go wrong for India.
He cites soaring inflation, corruption scandals, and a government that went through periods of “policy paralysis”.
However, Bhatia says that at the turn of the new year, India’s markets got off to a “stunning start”, surging ahead of the wider region by a strong margin. But then, just as the rally appeared to be too good to be true, it proved itself to be just that.
Investors will be forgiven for looking at the recent performance of Indian equities and wondering what has gone right for this economy says Bhatia. “The brief answer is, unfortunately, not much - we believe the markets bounced too high, too fast, and the slump we've seen more recently may be a sign that we are in for a few more turbulent months for India."
While this does not mean that a genuine recovery is not on the horizon, it does mean that investors may need to hold on tighter for a little longer.
"Our view is that a more sustainable rebound is likely to occur in the second half of this year but, until then, Indian equities are likely to endure a few more twists and turns," says Bhatia.
According to Morningstar performance figures the fund lost 31.5% in 2011. However, since the beginning of 2012, the fund has recovered along with the market. Year to date the fund has achieved growth of 13.63%.
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