Fairfax India Holdings (TSX:FIH.U) is an investment holding company that aims to achieve long-term capital appreciation by investing in public and private equity securities and debt instruments in India and Indian businesses. The stock has dropped 2.9% in 2019 as of close on December 16. However, shares are up 5.8% over the past month.
One of the biggest obstacles for the stock has been the falling fortune of the Indian economy. Moody’s recently slashed its GDP forecast for India in fiscal year 2020 to 4.9%. This was down from the original projection of 5.8%.
Weak household consumption has dragged down its GDP growth rate over this period, and the pinch is starting to rear its head in the political arena.
Fairfax India released its third quarter 2019 results on October 31. Net earnings fell to $89.2 million compared to $94.2 million in the prior year.
This drop was primarily due to a decrease in net unrealized gains on investments. Turbulence in the broader Indian economy is a concern for the stock going forward.
Its shares last possessed a price-to-earnings ratio of 13.4 and a price-to-book value of 0.9. However, it had an RSI of 70 as of close on December 16. This puts the stock into technically oversold territory.
Fairfax India looked like a promising growth stock as India’s economy picked up in 2017 and 2018, but recent developments are worrying. Shareholders should consider taking profits ahead of the New Year.