Net Asset Value(s)

7 January 2019

India Capital Growth Fund Limited (the "Company" or "ICGF")

Net Asset Value statement at 31 December 2018

Net Asset Value

The Company announces its Net Asset Value ("NAV") per share as at 31 December 2018 was 101.65 pence.

In December (in GB Pound terms) the NAV was up 4.0% whilst the BSE Mid Cap TR Index was up 3.3%, delivering an out performance against the notional benchmark of 0.7%. In local currency terms, the NAV was up 3.4% for the month.

Portfolio update

Positive contribution to the portfolio's performance came from Jyothy Labs (up 15.1%), City Union Bank (up 11.9%) and Kajaria Ceramics (up 12.2%). Negative contribution came from Aurobindo Pharma (down 9.6%), Radico Khaitan (down 3.6%) and Balkrishna Industries (down 3.8%).

Market and economic update

December was another volatile month for Indian equity markets. It began negatively with the BJP's defeat across three key state elections and this was followed by the surprise resignation of the Reserve Bank of India (RBI) Governor, Dr Urjit Patel. Sentiment recovered later in the month as macro-economic indicators improved on the back of crude oil prices further correcting by 9%, consumer price inflation being lower than expected in November at 2.3% (the lowest since June 2017), and with the appointment of Shaktikanta Das (ex-economic affairs secretary) as the Governor of the RBI for a term of three years. In the end the Sensex ended the month down 0.3% while Midcap Index was up 2.7%, both in local currency terms. Foreign Institutions and Domestic Institutions were both net buyers in the month (respectively US$332m and US$47m). In December the Rupee depreciated 0.3% against the US Dollar but appreciated 0.6% against the GB Pound.

The state election results were perceived to be a blow to the momentum of Prime Minister Narendra Modi ahead of national elections in 2019. The Congress Party is now set to succeed BJP governments in Rajasthan, Chhattisgarh and the crucial state of Madhya Pradesh, in the biggest defeat for Modi since taking office in 2014.

The recent change of RBI Governor follows long term and persistent differences on several issues between the Government and the central bank. However the market reacted positively to the appointment of Shaktikanta Das, perhaps believing it could lead to better communication between the RBI and the Government, some relaxation in certain regulations for the banking sector and a more accommodative monetary policy.