From Co-founder's Desk

Dear Investors,

India’s rejoicing of the containment of the Covid pandemic turned out to be too premature – the second wave took the government and people by complete surprise. What surprised us more than the second wave was the sheer intensity of the wave - daily new cases are approximately 4x of the peak of the first wave and the sudden shoot up happened in less than four weeks. This left little time for the governments to act; by the time the state governments started imposing controls on people movement, the damage was mostly designed if not done.

As various States entered lockdown/ operating restrictions, the Indian economy which was on path of strong recovery from the national lockdown of 2020, is again being threatened. We believe that the impact of these ‘surgical’ lockdowns will be significantly less than the total lockdown of 2020; but the disruptions do have the potential to impact segments of the economy and corporate profitability.

We see additional risks from the rising inflationary pressures globally – brent crude is flirting with $70 despite the demand hit from Covid and prices of several metals, lumber and food commodities have shot up over the last 12 months. India is a net importer of oil and most metals and inflation can be a major dent on the economy’s sustainable recovery.

So far, Indian equity market has shown a strong resilience, but we are mindful of the risks from worsening of the Covid pandemic, inflationary pressures and changes in global liquidity environment. We are actively managing our portfolio to avoid the above visible risks and benefit from the potential shift in the macro environment. Shift in the economic landscape from a global low growth deflationary environment where the central banks are continuously pumping liquidity into the markets to a high growth (led by Covid recovery globally) environment where inflation is picking up, calls for very careful readjustments in equity portfolio.

At Ace Lansdowne India Equity Fund, we are focused on delivering absolute and returns while keeping a strong check on the market volatility that can arise out of these uncertainties.

Stay safe and healthy!!