‘For investors, it’s all positive in India’

On November 8 the Indian prime minister unleashed probably the most unexpected and dramatic act of monetary policy by a politician in living memory. A population of 1.3billion was given four hours’ notice that 86pc of the country’s cash would become worthless.

Narendra Modi’s withdrawal of all 1,000-rupee and 500-rupee notes in a bid to stamp out corrupt “black money” is the latest in a series of policies that aim to modernise the country at breakneck speed.

For decades India and China have battled to be chief among the emerging markets that investors use to diversify against British and American stocks.

Could India’s overnight economic revolution and more favourable demographics – it boasts a far younger population than its bigger rival – finally tip the balance in its favour?

Telegraph Money spoke to Avinash Vazirani, the manager of the £673m Jupiter India fund, on his return from the subcontinent, where he spent time accompanying TheresaMay on her first trade trip to the region.

There is a lot going on in India at the moment…

No one was expecting Modi’s “de-monetisation” and it comes at the same time as a new goods and services tax, essentially VAT, and an enormous new social security system. Not only that, but around 250million brand new bank accounts have been opened over the past 18 months. The government currently spends lots of money subsidising everything and most of it ends up in the wrong hands.

Those bank accounts have been opened so that social security goes directly to the people it is trying to help – it will be the only social security system in the world that actually saves the government money.

There is even talk of doing a “helicopter drop” of money into the bank accounts of these people if the economy slows down this year. It’s a very exciting time.

What does this mean for investors?

There are hundreds of politicians but very few leaders – Modi is a true leader. The de-monetisation policy is a huge risk but he has done it. I’m sure over the long period it will be successful.

You’ve got a good leader at the top and for the first time in the history of the country you have a centre-right party with a majority in parliament. It is pro-business but also anticorruption – he is taking steps no one has taken in the history of the country. For investors these are all positives. There will be a short-term, perhaps up to six months, bad impact on the economy. Economic output and corporate profits will not be good in December and the first quarter of 2017 but over the long term the changes will be beneficial.

I predict a “J curve”: a dip and then an increase in consumption, demand and profitability for listed companies at the expense of the tax dodgers.

What is your investment philosophy?

We are trying to invest in growth companies that benefit from the trends we’ve discussed. The impact of all of these things on consumption and company valuations has not really been modelled – and it’s really quite positive for the economy. Our average holding period is five to six years.

Momentous change is sweeping the country, the manager of Jupiter’s India fund tells Sam Brodbeck

What has been your biggest win?

Force Motors, a tractor and small commercial vehicle manufacturer that also makes engines for BMW and Mercedes. We bought at 700 rupees a share in 2010 and the current price is around 4,000 rupees.

Any standout failures?

We have overestimated the ability of companies to make money in certain industries such as solar energy. One company we sold recently was Jubilant FoodWorks, the owner of the Domino’s and Dunkin’ Donuts franchises. Unfortunately doughnuts have not taken off in India.

Do you invest in the fund?

Yes, I won’t say how much but it is a reasonable amount.

What would you have done if you hadn’t become a fund manager?

I would have been some kind of businessman. I led a management “buy-in” of a food company before I become a fund manager.

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