We are on the cusp of corporate India meaningfully re-leveraging. Despite the elections-related slowdown in government spending over the last six months and the unseasonal rain and flooding in several states, aggregate corporate capex for the BSE 1000 clocked in at INR10 trillion ($158 billion) for the 12 months ended September, up 18% y-o-y. This exceeds government capex and reflects boardroom optimism in India over the resilience of underlying economic fundamentals, high utilisation rates across consolidating sectors, and the willingness to commit under-leveraged balance sheets and free cash flows to a new corporate capex cycle with good visibility on sustained revenue and margin uplift.
The Tantallon India Fund closed 2.18% lower in November as uncertainty over the US presidential election quickly gave way to concerns about sustained foreign portfolio outflows and headwinds for the Indian yield curve and rupee and “restricted” government spending in the build-up to the national and state elections, disruptive tariffs and geopolitical realignments, and stubborn inflationary expectations limiting the Reserve Bank of India’s (RBI) options.
Despite the very “noisy” few weeks, we have focused on fundamentals and tried to take advantage of stock price volatility to buy high-conviction names when valuations are compelling. Taking a step back from the markets, our recent meetings on the ground drove home the saying: “History doesn’t repeat itself, but it often rhymes.”
