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

Investor Class | Institutional Class
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Q1 2018
Following Strong Gains in 2017, Indian Stocks Stepped Back in the First Quarter
by Ajay Krishnan, CFA and Matthew Dreith, CFA

“Despite the slight deterioration we saw in the first quarter, India’s macro situation still looks solid. We have been seeing a pickup in economic indicators such as bank lending and vehicle and retail sales. As for our portfolio companies, we remain quite optimistic about their prospects.”

Ajay Krishnan
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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.

Investing in small or micro cap funds will be more volatile and loss of principal could be greater than investing in large cap or more diversified funds.
Investing in foreign securities, especially in emerging markets, entails special risks, such as currency fluctuations and political uncertainties, which are described in more detail in the prospectus.
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For the period ended March 31, 2018, the average annual total return of the Wasatch Emerging India Fund for the 1-year, 5-year and since inception periods were 19.18%, 18.07% and 12.55%. The returns for the MSCI India IMI Index were 11.22%, 9.44% and 3.08% respectively. Expense ratio: Gross 1.73% / Net 1.73%.  

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.


The benchmark MSCI India Investable Market Index (IMI) fell -8.02% during what was an up-and-down first quarter of the year for Indian equities. Outperforming its benchmark, the Wasatch Emerging India Fund—Investor Class declined -4.70%.

India’s stock market began the quarter in rally mode, as last year’s advance continued unabated during the first four weeks of 2018. In late January, however, global stock-market jitters and concerns about an international trade war sent Indian stocks lower for the remainder of the quarter. Worries that lower-than-expected tax revenues might lead India’s government to impose a capital-gains tax contributed to early skittishness. Later, news of a $2 billion fraud centered at one of the country’s state-owned banks rocked investor confidence.

Rising interest rates also weighed on sentiment. Rates had been on the rise in India since mid-2017, as bond investors mulled a likely surge in government spending ahead of next year’s elections. The Modi government’s funding requirements created an excess supply of government debt that continued to push bond yields higher during the first quarter.

Adding to the woes in Indian financial markets was a report showing that the nation’s current-account deficit had widened to $13.5 billion in the fourth quarter of 2017—up from $7.2 billion during the previous three months. Reflecting the deterioration in fiscal and current accounts, India’s currency slipped approximately 2.0% against the U.S. dollar during the first three months of 2018.

A bit of relief came in mid-March when newly released data showed that falling prices for crude oil and tomatoes helped drive India’s inflation rate below 5% in February for the first time since November 2017. The encouraging dip in inflation gave investors hope that the central bank would keep the repo rate unchanged at its April meeting.

The consumer-discretionary sector was the Fund’s greatest source of outperformance relative to the benchmark. Although the benchmark’s consumer-discretionary positions posted a double-digit percentage loss as a group, the Fund’s holdings in the sector ended the quarter with a modest gain. Amid the broad weakness in Indian equities, the information-technology sector was the only sector of the Index to generate a positive first-quarter return. Our significantly underweight allocation to this top-performing sector was a headwind to performance and the Fund’s largest source of weakness against the benchmark.

Details of the Quarter

The strongest contributor to Fund performance for the quarter was V-Mart Retail Ltd. The company operates department stores specializing in apparel. V-Mart also sells a wide range of general merchandise and fast-moving consumer goods. Profit after tax at the company rose 27.4% in its most-recent quarter on a 12.6% increase in total revenues. Because V-Mart operates primarily in rural areas of India, the company stands to benefit as the Modi government seeks to create jobs and appeal to voters ahead of national elections in 2019.

MakeMyTrip Ltd. (MMYT) was the second-largest contributor. The company operates the leading online travel agency (OTA) in India. Shares of MakeMyTrip had languished over the previous three quarters on concerns that increased competition might impact the company’s profitability. Those worries eased in February after MakeMyTrip announced a partnership with OYO, the largest hospitality company in India. Under the agreement, OYO’s chain of hotels will be listed and available for booking on MakeMyTrip’s OTA. With competitive intensity easing and demand picking up across the company’s business segments, we think MakeMyTrip is well-positioned for long-term growth.

Third-largest contributor Godrej Consumer Products Ltd. is a consumer-goods company. Godrej sells soaps, hair colors, toiletries and household goods in India and internationally. Consolidated net profit rose 22.1% year-over-year in the company’s most-recent quarter on an 8.5% increase in comparable sales. Management cited strong volume growth in India, especially in rural areas of the country.

Industrial companies accounted for four of the Fund’s five largest detractors from performance during the quarter. Among them was the greatest detractor, Elgi Equipments Ltd. Elgi manufactures and sells air compressors in India and internationally. The company currently receives about half its revenue from outside India and approximately 60% of its international revenue from the U.S. and Europe. Elgi’s stock price declined during the latter half of the first quarter on concerns that U.S. President Donald Trump’s protectionist trade policies might derail the company’s plans for further inroads into the U.S. market.

Other weak industrials in the Fund included Somany Ceramics Ltd. and Kajaria Ceramics Ltd.—two large producers of ceramic tiles for walls and floors. A reduction in India’s goods-and-services tax (GST) last November caused customers to delay purchases until the new, lower tax rate had taken effect. Slower volume growth squeezed profit margins as manufacturing capacities operated at sub-optimal levels. An uptick in gas prices also hurt profitability, resulting in lower-than-expected quarterly earnings at the companies compared to the same period a year ago. (Current and future holdings are subject to risk.)


Although a rising supply of government debt has driven Indian bond yields higher since July of last year, there are signs that interest-rate pressures in India may be easing. In late March, the Indian government announced a borrowing plan for the first half of its fiscal year that is lower than in previous years. In an attempt to further encourage bond investors, India will issue inflation-indexed bonds and shorter-maturity debt. The Modi government also is seeking to increase purchase limits for foreign investors in government securities.

One of the other factors that contributed to a general first-quarter malaise in Indian stocks was fading optimism about the prospects of Prime Minister Narendra Modi’s Bharatiya Janata Party (BJP) in upcoming state polls this year and general elections in 2019. While a strong showing from the BJP would help further Mr. Modi’s pro-business agenda, we seek to invest in companies whose business prospects do not depend on a particular political outcome.

Despite the slight deterioration we saw in the first quarter, we believe India’s macro situation still looks solid. We have been seeing a pickup in economic indicators such as bank lending and vehicle and retail sales. As for our portfolio companies, we remain quite optimistic about their prospects. We have been seeing accelerating earnings growth that we have been capturing in the Fund. For the most-recent quarter, we calculated that the Fund’s holdings, on average, turned in 27% earnings growth. We continue to have confidence in India as an attractive place to invest and in the long-term growth potential of our portfolio companies.

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.

Earnings growth is a measure of growth in a company’s net income over a specific period, often one 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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