Infra,consumer cos are Fidelity’s top picks

Poor infrastructure,including severe power shortages,is seen as a key obstacle to faster growth in Asia’s third-largest economy.

The country’s structural growth opportunities can continue to drive attractive long-term stock market returns,said Teera Chanpongsang,manager of Fidelity’s $2.9 billion India Focus Fund.

He finds the infrastructure sector attractive and likes the the government-owned power finance company Rural Electrification Corp,truck manufacturer Ashok Leyland and railway wagon and earth moving equipment maker BEML.

These stocks benefit from the growth of the infrastructure sector but are less exposed to execution risks.

However,he said the government was taking steps to cut delays by offering incentives to the more efficient private sector to participate in infrastructure projects,potentially benefiting the whole sector.

According to Lipper Global the Fidelity Fund – India Focus returned 99.35 percent in the year to April 30,outperforming peers by 9.26 percentage points in dollar terms.

CONSUMER NEEDS

Chanpongsang’s fund has benefited most from a positive stance towards consumer discretionary stocks.

Car sales in India posted their strongest April in at least a decade,jumping an annual 39.5 percent,showing consumer demand remained robust.

Chanpongsang highlighted motorbike manufacturer Bajaj Auto,utility vehicles and tractors manufacturer Mahindra & Mahindra and Pantaloon Retail as significant contributors.

A young and fast-growing population (of around 1.2 billion) continues to boost India’s workforce and consumer base,said Chanpongsang.

Low penetration of durable goods,growing affluence and a high savings rate also provide a strong base for demand growth.

Chanpongsang sees little risk to India from the fallout over European and global sovereign debt problems and retains a heavy weighting towards financials in his portfolio ICICI Bank and HDFC Bank are in the top five holdings within his portfolio.

The banks have adequate capital and non-performing loans are quite low and so I do not see any long-term impact on India,he said.