7 reasons India could be the next investment superpower
4 minutes reading time
As the global economic landscape evolves, a new titan is swiftly rising in the East. A country where a rich history intertwines with remarkable modernisation, where the ancient and the futuristic not just coexist, but flourish together.
Welcome to India – a nation known for its multifaceted culture, and which has begun to garner acclaim as one of the fastest-growing economies globally.
Surging foreign investments, robust economic fundamentals, and a strategic geopolitical stance have made India a burgeoning power player in the international financial arena. Prepare to embark on an exploration of the thriving Indian market, its immense potential, and the alluring opportunities it offers for global investors.
Here are a few reasons investors are considering adding Indian equities to their portfolio.
Strong economic fundamentals
India is one of the fastest-growing economies globally, offering untapped potential and opportunities for businesses and investors alike. It’s easy to get enamoured by the country’s dynamic growth story – and it’s not just about the numbers, the underlying economic fundamentals are robust too.
India’s growth narrative is propelled by economic and earnings growth, political stability, and a rapidly ballooning consumer market. These factors have successfully maintained investor enthusiasm, even as equity market valuations have increased.
Increasing foreign investment
Global investors are not just noticing, they’re acting. Indian equities have attracted nearly US$10 billion in net foreign inflows since March.1 This inflow of funds has been instrumental in driving Indian equities to record-breaking highs, a testament to the renewed investor interest and confidence in the Indian market.
India’s increasing importance on the global stage
India’s strategic geopolitical positioning, especially its role in the evolving Indo-Pacific region, has made it a linchpin in global power dynamics. The rise of the Quadrilateral Security Dialogue (QUAD) and the series of high-level meetings between Indian and US leaders underline the growing international significance of India.
Investment from tech giants
Tech giants have chosen to branch into India. US behemoths like Amazon and Google are boosting their investments in the country. For instance, Amazon Web Services’ whopping US$12.7 billion investment in India’s cloud infrastructure and Google’s plans for a global fintech centre in Gujarat is a bold statement of India’s growing tech prowess.2
Potential investments from companies like Tesla and Micron Technology2 highlight the country’s ability to lure large-scale investments from multinational corporations. This trend solidifies the bullish sentiment around the Indian investment climate.
A young and growing population
India’s large, growing, young population has driven economic growth for years, and will continue to drive it in the years ahead.
India accounts for ~18% of the global population,3 and the median age is just 27.6. For comparison, the median age is 48.4 in Japan, 37.9 in China, 37.7 in the US, and 37 in Australia.4
A young population means more working-age people to pay tax and support those not in the workforce.
The shift from China to India
One of the key factors bolstering India’s emerging market position is the strategic pivot of investors and corporations from China to India. This transition has been fuelled by China’s less-than-stellar post-pandemic recovery and its increasingly strained relations with the West.
Attractive market fundamentals
While India’s market isn’t the cheapest globally, it does look attractive when estimated growth is considered. The table below shows the market fundamentals for a selection of major global indices, including India’s BSE SENSEX index.
|Index Name||Est. EPS growth||P/E Ratio||Fwd P/E||Price/Sales||Price/Book|
|China CSI 300||22.51%||14.0||12.1||1.3||1.6|
|India BSE SENSEX||25.63%||24.4||21.2||3.2||3.6|
Source: Bloomberg, Betashares. As at 5 July 2023.
India’s compelling combination of economic fundamentals, geopolitical positioning, and growing attraction for global corporations makes it a must-watch in the investment universe. This shift from China to India is not merely a reaction to short-term global dynamics; it’s a testament to India’s intrinsic value and immense potential for future growth.
Investors take note! India is making its mark on the global investment map.
Investors looking for exposure to India’s growth story could consider the IIND ETF. This fund offers exposure to top Indian companies, selected based on profitability, leverage, and earnings stability. This quality-focused strategy seeks to exploit inefficiencies in India’s equity market over the long-term more effectively than traditional market-cap weighted strategies.
There are risks associated with an investment in IIND, including market risk, index methodology risk, international investment risk, concentration risk and currency risk. Investment value can go up and down. An investment in IIND should only be considered as a part of a broader portfolio, taking into account your particular circumstances, including your tolerance for risk. For more information on risks and other features of IIND, please see the Product Disclosure Statement (PDS) and Target Market Determination (TMD), both available at www.betashares.com.au.
Formerly Managing Editor at Livewire Markets. Passionate about investments, markets, and economics.Read more from Patrick.