Overseen by Liontrust, the India Capital Growth Fund (LON:IGC) is an exciting proposition for growth-focused investors comfortable with some risk. This single-country trust offers exposure to a concentrated portfolio of exciting Indian mid and small caps.
Medium and smaller sized firms represent a growth engine for India, which remains the world’s fastest growing major economy.
India is an emerging market that has historically delivered strong and consistent earnings growth. For this reason, investors that have taken advantage of sell-offs to buy the dips have been rewarded.
Investors who want to learn more about the India Capital Growth Fund should attend the Sharesify Wealth & Retirement Show (6 November). On the day, manager Gaurav Narain will be discussing growth investing and outlining the trust’s many merits to investors.
What is the investment objective?
‘ICGF’ invests mainly in high-quality medium and small-sized companies in India. As of 30 September 2026, 62.2% of the portfolio was invested in small companies. For the uninitiated, these are defined as businesses with a market capitalisation below US$4 billion.
In addition, roughly 33% was invested in medium sized companies with market capitalisations between US$4 billion and US$11.5 billion. However, Mumbai-based Narain has the ability to invest in large cap and private Indian companies where he sees potential for long-term capital growth.
| Top 10 holdings – as at 30/09/26 | Weight (%) | Market cap (US$bn) |
| RBL Bank | 5.6% | 6.5 |
| Skipper | 5.5% | 0.7 |
| Multi Commodity Exchange | 5.1% | 8.8 |
| IDFC Bank | 4.0% | 7.3 |
| Federal Bank | 3.9% | 8.2 |
| Dixon Technologies | 3.9% | 8.3 |
| City Union Bank | 3.7% | 2.3 |
| Sona BLW Precision Forgings | 3.4% | 5.4 |
| Aether Industries | 3.4% | 2.3 |
| Neuland Laboratories | 3.4% | 2.9 |
Source: India Capital Growth Fund, Liontrust
The fund’s investment philosophy centres on owning businesses with strong fundamentals, capable management teams and sustainable long-term growth potential. Portfolio turnover is low. Roughly 60% of the holdings have been owned for more than five years.
ICGF held just 36 stocks at last count. This reflects Narain’s preference for running a concentrated portfolio of high-conviction investments.
| Share price: 172p | NAV: 192.7p |
| Dividend yield: 2.2% | Discount to NAV: 10.7% |
Source: The AIC/Morningstar, as at 20 October 2026
Narain invests in companies that are well placed to benefit from the structural growth potential of the Indian economy. Moreover, he backs quality management teams that are best able to exploit this opportunity.
The bottom-up stock picker invests with the owner’s eye. And he seeks out companies capable of delivering superior absolute returns over the long haul.
Why India, why now?
After a challenging 18 months, prospects for India’s economy and stock market look more positive. Previously, Indian stocks were viewed as expensive. However, valuations are now looking much more palatable.
Furthermore, foreign interest in the Indian stock market is at a low level. As such, a more positive global environment could result in some upward momentum for the Indian market.
Demographic dividend
Over the last 30 years, India has been one of the best performing major stock markets globally. The country is blessed with favourable demographics due to a growing, working-age population. And the macroeconomic backdrop remains robust.
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In fact, the IMF (International Monetary Fund) recently upgraded its forecasts for India’s real GDP (gross domestic product) to 7% for both 2026 and 2027. This upward revision primarily reflected stronger-than-expected economic momentum, resilient domestic demand and robust services sector activity.
In addition, India has globally competitive companies in industries ranging from IT services and pharmaceuticals to petrochemicals to name a few. Furthermore, its equity market offers investors like Narain a broad base of top class entrepreneurs to back.
What’s in the portfolio?
ICGF’s portfolio is packed with companies that have long runways for growth in this vast domestic economy.
Top 10 holdings include Skipper, India’s largest integrated transmission and distribution tower structures manufacturer. Another is RBL Bank, which has a strong presence in retail lending, credit cards and MSME banking.
Investors are also buying exposure to Multi Commodity Exchange. This is India’s largest commodity derivatives exchange. Other exciting holdings include pharmaceutical ingredient maker Neuland Laboratories and Coforge, a fast-growing IT services and digital transformation company.
Premiumisation play
ICGF is also a backer of Indian alcoholic beverages company Globus Spirits. Globus is transitioning from a manufacturing-led business to a branded consumer alcohol company.
And Narain believes the business is well positioned to benefit from both stronger growth and margin expansion, supported by India’s ongoing premiumisation trend.
As the table below shows, ICGF is the best one, five and 10-year share price total return performer in the AIC’s India/Indian Subcontinent sector. The trust has returned 6.4%, 40.8% and 129.4% respectively over these time periods.
In recent years, ICGF has enjoyed a re-rating, supported by ongoing share buybacks. Yet the fund still trades at a 10.7% share price discount to NAV (net asset value), which suggests the trust still represents good value.
| AIC Sector – India / Indian Subcontinent | Discount to NAV | 1-yr share price total return | 5-yr share price total return | 10-yr share price total return |
| India Capital Growth | -10.7% | +6.4% | +40.8% | +129.4% |
| Aberdeen New India | -10.3% | -10.6% | +12% | +76.7% |
| JPMorgan India Growth & income | -8.7% | -15.1% | +7% | +32.3% |
| Ashoka India Equity | -4.7% | -10.1% | +21.4% | N/A |
Source: The AIC/Morningstar, data as at 20 October 2026
In her interim results statement (24 September), chair Elisabeth Scott observed: ‘Despite heightened geopolitical uncertainty and subdued international investor sentiment towards India, the company delivered positive NAV and share price returns in the first half of 2026 and outperformed its benchmark.’
Compelling backdrop
She also issued a positive outlook for India and the trust: ‘The board remains optimistic about the long-term prospects for India, where improving valuations and historically low levels of foreign investor participation provide a compelling backdrop for future growth.’
Reflecting this confidence, the trust declared its first ever dividend of 2p per share under a new dividend policy of paying 2% of prevailing NAV.
Shareholder-friendly refinements
Besides the dividend, the board has introduced other measures to help ICGF navigate the choppy environment for investment trusts.
These include a five-yearly conditional performance-related tender offer for up to 25% of the shares. ICGF has also adopted the MSCI India SMID Cap Index as its performance benchmark.
These changes have broadened the company’s appeal without compromising Narain’s ability to capture the growth opportunities available within Indian mid and small cap equities.
