Morgan Stanley Growth Fund, India (MSGF IN)

We will demonstrate how a fund takes advantage of India’s growing economy and improving skills sets. India’s recent years success can be evidenced by the rapid economic growth (10% annualized) it experienced as well as the material improvements one can see by going to major cities. On average return on Assets of companies is 10% and the average P/E ratio is 33 times. India has over 170 Bn USD of foreign exchange reserves and CPI of 4%.

This is one of the most popular funds for foreigners who want to invest in India. The fund is currently trading at a 10% discount to its NAV. Analysts expect the 10% discount to be fully eliminated in 2 years time. In October 2005 the fund was trading at a discount of 20% and now the gap has narrowed by almost a half. Furthermore given the funds 15 year redemption date we expected the NAVto narrow linearly with time.

The fund has a strong long term performance expectation relative to the Indian market so NAV performance should at least match the market return.  

The main catalyst for this fund is the expected continuous growth of the Indian economy. Furthermore there is an expected 2% FX appreciation for this year as well as the NAV spread is expected to narrow by approximately 5% which turbo-charges the funds total return.

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