Wasatch Emerging India Fund® (WAINX)  Invest in this Fund 

Investor Class | Institutional Class
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Benign Inflationary Environment Allowed Central Bank to Ease
by Ajay Krishnan, CFA and Matthew Dreith, CFA

“With consumer-price inflation currently around a modest 2%, the Reserve Bank of India (RBI) cut interest rates in February to spur economic growth—and new RBI Governor Shaktikanta Das has signaled the possibility of future cuts.”

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Performance for the Institutional Class prior to 2/1/2016 is based on the performance of the Investor Class.  Performance of the Fund's Institutional Class prior to 2/1/2016 uses the actual expenses of the Fund's Investor Class without any adjustments. For any such period of time, the performance of the Fund's Institutional Class would have been substantially similar to, yet higher than, the performance of the Fund's Investor Class, because the shares of both classes are invested in the same portfolio of securities, but the classes bear different expenses.

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For the period ended March 31, 2019, the average annual total return of the Wasatch Emerging India Fund for the 1-year, 5-year and since inception periods were 4.43%, 16.59% and 11.49%. The returns for the MSCI India IMI Index were 2.98%, 8.59% and 3.07% respectively. Expense ratio: Gross 1.70%.  

Data shows past performance, which is not indicative of future performance. Current performance may be lower or higher than the data quoted. To obtain the most recent month-end performance data available, please click on the “Performance” tab of the individual fund under the “Our Funds” section. The Advisor may absorb certain Fund expenses, without which total return would have been lower. Investment returns and principal value will fluctuate and shares, when redeemed, may be worth more or less than their original cost.

Wasatch Funds will deduct a 2.00% redemption proceeds fee on Fund shares held 60 days or less. Performance data does not reflect the deduction of fees, including sales charges, or the taxes you would pay on fund distributions or the redemption of fund shares. Fees and taxes, if reflected, would reduce the performance quoted. Wasatch does not charge any sales fees. For more complete information including charges, risks and expenses, read the prospectus carefully.

Wasatch Funds are subject to risks, including loss of principal.


Indian equities registered solid gains during the first quarter of the year, with the benchmark MSCI India Investable Market Index (IMI) rising 6.65%. Trailing the benchmark somewhat, the Wasatch Emerging India Fund—Investor Class returned 5.32%.

Apprehension surrounding India’s upcoming general election helped keep stock-market gains in check during January and February. Investors feared populist measures designed to enhance the ruling coalition’s approval with voters might strain India’s finances. Rising oil prices also raised concerns in a country that imports about 80% of the oil it uses. Worries grew that India’s higher energy bill might widen the nation’s current-account deficit and weaken the currency.

Sentiment improved in March after war was averted in the conflict with Pakistan along India’s northern border. Prime Minister Modi’s decision to target terrorist camps in Pakistan appeared to bode well for his party’s electoral chances and pro-business agenda. Energy stocks led India’s equity market higher as the price of Brent crude surged 25% during the first three months of the year. Energy was the top-performing sector of the Index, and the Fund’s lack of investments in energy stocks was the primary reason the Fund lagged its benchmark.

Information-technology (IT) stocks also were strong performers, as the IT component of the Index posted a double-digit percentage gain during the quarter. As with energy, however, the Fund’s significantly underweight position in IT hurt performance. The Fund’s zero-weight allocation to energy stocks is structural, as the large capital requirements and generally unattractive growth profiles of these companies don’t fit our investment style. In IT, our current underexposure is due to a focus on smaller, faster-growing IT companies versus the benchmark, which is dominated by larger, slower-growing IT service companies.

Consumer discretionary was one of the poorest-performing sectors after a lackluster festival season in 2018 fanned concerns that India’s economy may be slowing. Although the Fund’s consumer-discretionary stocks outperformed the benchmark’s consumer-discretionary positions, our overweight position in the sector offset that advantage. Health care and communication services were the Fund’s greatest sources of strength against the benchmark. In both of these sectors, our stocks appreciably surpassed their counterparts in the Index and helped Fund performance.

Details of the Quarter

Financials accounted for a number of the Fund’s best performers. These included the two top contributors to performance for the quarter, ICICI Lombard General Insurance Co. Ltd. and Bajaj Finance Ltd., respectively. ICICI Lombard is one of the largest private-sector general insurers in India. The company offers motor-vehicle, health, home, travel and other types of insurance coverage. An upswing in India’s insurance cycle continued to benefit ICICI Lombard and other insurance companies. Gross direct premium income (GDPI) at ICICI Lombard grew 25.9% year-over-year in the company’s most-recently reported quarter compared to 13.6% growth in GDPI for the industry as a whole.

A non-bank financial company, Bajaj Finance is the lending arm of the Bajaj Group—a well-regarded Indian industrial house founded in 1926. The company is experiencing secular demand growth driven by increased financialization, favorable demographics and a cultural shift away from extended-family living arrangements. Consolidated profit after tax at Bajaj Finance jumped 54% in its most-recent quarter on a 49% increase in new loans booked versus the year-ago quarter. We believe the company is creating significant headroom for future growth through its innovative use of technology to expand the markets it serves.

Divi’s Laboratories Ltd., a health-care holding, was another top contributor. The company manufactures active pharmaceutical ingredients and intermediates. Divi’s is experiencing strong demand in the generic and big-pharma segments of its business. Standalone net profit surged 68% in the company’s most-recent quarter on 29% revenue growth. Divi’s is expanding its facilities at Visakhapatnam and Bhuvangiri-Yadadri to increase production capacities. The company expects the projects to be completed later this year.


The greatest detractor from Fund performance for the quarter was Godrej Consumer Products Ltd. Operating both in India and internationally, Godrej is one of the leading manufacturers of household insecticides in India. As consumers seek new forms of protection from mosquito-borne diseases, illegally manufactured mosquito-repellent incense sticks have captured a growing share of India’s household-insecticide market. Now that Godrej has launched its own mosquito-repellent incense stick under the flagship Goodknight brand, we expect the competitive situation to improve. The recent slowdown in the company’s African and Latin American consumer-products businesses is less clear cut, however, and our research is ongoing.

Other weak stocks in the Fund included GRUH Finance Ltd. and Bandhan Bank Ltd. GRUH provides a range of home loans and insurance products through a network of offices in India. Bandhan is a commercial bank offering traditional and internet-banking services. Investors reacted negatively to news that Bandhan was acquiring GRUH in a stock-swap deal. The stock prices of both companies fell on the news, as the shareholders of both firms were unhappy with the details of the transaction. We liquidated the Fund’s positions in both companies to seek better opportunities elsewhere. (Current and future holdings are subject to risk.)


According to official government data released in February, India’s year-over-year gross domestic product (GDP) growth slowed to 6.6% during the fourth quarter of last year—down from a revised 7% in the previous quarter and the weakest reading in six quarters. For a variety of reasons, we don’t view this report as a significant cause for concern.

First, our investment approach isn’t driven by economic forecasts. Although we take macroeconomic factors into account, most of our analysis focuses on the growth prospects of individual companies. We look for stable businesses benefiting from secular trends tied to the country’s long-term development. Recent financial results from the companies we own in the Fund have generally been positive, with strong top-line growth in a number of our consumer-related businesses.

Second, part of the recent slowdown resulted from sluggish sales of passenger cars and two-wheeled vehicles. Much of this can be attributed to higher financing costs and a shortage of loans during the fourth quarter as India’s shadow-banking system recovered from the default of a major player. Having recently returned from a two-week trip to India, our team reports that tighter liquidity conditions are helping the Fund’s non-bank financial companies gain market share. As weaker competitors struggle to obtain funding, ready access to low-cost capital is providing a key competitive advantage to high-quality businesses with strong parent-company backing.

Third, a benign inflationary environment has allowed India’s central bank to take a more-accommodative stance with respect to monetary policy. The Reserve Bank of India (RBI) cut interest rates in February to spur economic growth, and new RBI Governor Shaktikanta Das has signaled the possibility of future cuts. With consumer-price inflation currently around 2%—roughly half the RBI’s 4% target, we think continued favorable readings on inflation may give the central bank scope to pursue additional easing.

Thank you for the opportunity to manage your assets.


Ajay Krishnan and Matthew Dreith


The MSCI India Investable Market Index (IMI) covers all investable large, mid and small cap securities across India, targeting approximately 99% of the Indian market’s free-float adjusted market capitalization. You cannot invest directly in this or any index.

Source: MSCI. The MSCI information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for or a component of any financial instruments or products or indexes. None of the MSCI information is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such. Historical data and analysis should not be taken as an indication or guarantee of any future performance analysis, forecast or prediction. The MSCI information is provided on an “as is” basis and the user of this information assumes the entire risk of any use made of this information. MSCI, each of its affiliates and each other person involved in or related to compiling, computing or creating any MSCI information (collectively, the “MSCI Parties”) expressly disclaims all warranties (including, without limitation, any warranties or originality, accuracy, completeness, timeliness, non-infringement, merchantability and fitness for a particular purpose) with respect to this information. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, indirect, special, incidental, punitive, consequential (including, without limitation, lost profits) or any other damages. (www.msci.com)

CFA® is a trademark owned by CFA Institute.

The Wasatch Emerging India Fund’s investment objective is long-term appreciation of capital.

Gross direct premium income (GDPI) is a statement of the money that an insurer has earned from premiums and eliminates any money that is or will be paid out elsewhere from those premiums.

Gross domestic product (GDP) is a basic measure of a country’s economic performance and is the market value of all final goods and services made within the borders of a country in a year.

The MSCI India Investable Market Index (IMI) covers all investable large, mid and small cap securities across India, targeting approximately 99% of the Indian market's free-float adjusted market capitalization.


You cannot invest directly in indexes.

View the Emerging India Fund’s most current Top 10 Holdings

Portfolio holdings are subject to change at any time. References to specific securities should not be construed as recommendations by the Funds or their Advisor.

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