As quality growth investors, we search for companies able to grow through the full market cycle, but some shakes can be too strong and damage long-term potential. With decent exposure to India, we initially saw the dramatic ”demonetization” move by the Indian government as an important step for modernization but might shock the system in the near term. With cash worth 86% of the outstanding stock being replaced with little notice, in a cash based economy, there was potential for a disruption to India’s strong growth – and the MSCI India Index sold off 8% in US dollar terms in 4Q16.
The result has been interesting.
Politically, the process has proven popular. What we have found at the company level though is discussed in the attached note authored by Sudhir Roc-Sennett from our research team.