In the long run, India has become one of the best markets in the world | Wilnesh News
The recent surge in Indian stocks has investors eyeing the country as an emerging market poised to outperform over the long term. India’s domestic stock market benchmark NSE Nifty 50 index has soared 18.7% this year to hit a record high. The iShares MSCI India ETF (INDA), which tracks the Indian market, is also up nearly 19% in 2024. It also outperformed the broader iShares MSCI Emerging Markets ETF (EEM)’s 16% gain. The bullish market in India is driven by several factors, including an increasingly tech-savvy banking system, public infrastructure investment and supply chain diversification outside China. On top of that, consumer spending and real estate investment are growing. “India is by far the best structural story in emerging markets, but it’s probably the best in the world right now,” Malcolm Dorson, head of emerging markets strategy at Global , Indian markets have delivered strong returns with reduced volatility.” .NSEI YTD has topped Nifty 50 performance this year. Dolson noted that Indian stocks have become more attractive given the lower interest rates from the Federal Reserve. The Federal Reserve cut interest rates by half a percentage point last month, and traders expect further cuts before the end of the year. According to Global The Indian index rose by an average of more than 27% in the six months after the Federal Reserve ended its interest rate cut cycle, outperforming other major global benchmarks. Based on data going back to 2000, this increase will grow to 38% after 12 months. Outperforming U.S. emerging markets… now it’s an amazing compounding story,” Dolson said. India surpasses China In addition, India remains the fastest-growing major economy in the world and has also surpassed China to become the largest emerging market. This year, India surpassed China on a country-weighted basis in the MSCI Global Index. Investors tend to like India’s stance vis-à-vis China given its higher earnings growth. Dolson expects profits in India to grow about 6% to 8% annually over the next five years, with this high growth being reinvested in profitable projects, he said. They also view India as a defensive play, given its friendly relations with international governments and its status as the world’s largest democracy. The latter makes India more likely to attract foreign investment and insulate itself from the risks of global trade wars. India has also outperformed broader emerging markets in recent years. Over the past five years, INDA funds have surged 77.2%, while EEM has gained just 16%. Looking back at 2015, INDA had bigger annual gains and smaller losses than broader emerging market funds. Amr Abdel Khalek, emerging markets strategist at MRB Partners, is also bullish on India’s growth. “People need to pay more attention to (India) because as it has a younger population and people move from the lower class to the middle class, it will increasingly become a source of demand for the rest of the world. So there’s a lot of potential there,” Kalek told CNBC. He recommends continuing to overweight emerging market stocks in global equity portfolios, with a preference for non-China stocks. Risks Granted, investing in India is not without risks. If the Federal Reserve cuts interest rates less than expected, headwinds for the stock market could come from the United States. Traders expect more rate cuts before the end of the year, according to CME Group’s FedWatch tool. However, Federal Reserve Chairman Powell said the central bank may implement smaller interest rate cuts in the future. In addition, India also faces a crisis of income inequality. Barclays analyst Venugopal Garre pointed out that although the middle class is in a new stage of growth, the top 10% of India’s population controls nearly 50% of the country’s national income. “The risk is that jobs fail to form as hoped and India’s economic progress is derailed by changes in the domestic political environment and geopolitics,” he said in a note in early September. How to play Indian markets In India’s booming stock market , financial stocks are one of the favorite sectors among investors. Krishna Mohanraj, portfolio manager at Diamond Hill Capital Management, calls the country’s banks an attractive sector. “You’re going to see three things happening: GDP growth, overall banking system growth, and the increasing size of private sector banks relative to public sector banks. So over the next decade, put all three of those things Together, it seemed like a great place to be,” Mohanraj told CNBC. “Valuations in the banking sector are more reasonable than industrial or consumer valuations, so you get a valuation advantage as well.” Global . US investors can buy ADRs of ICICI and HDFC. However, Axis Bank can only purchase over the counter. Dolson said the Indian financial sector is undervalued. He said all three banks were “high-quality banks” that had invested heavily in technology over the past few years. Growing online banking can also help these banks save costs by shrinking their physical footprint. Dolson and Mohanraj also like stocks related to India’s domestic infrastructure buildout but believe some parts of Indian industry are too expensive right now. “India has been investing aggressively in infrastructure. I don’t see any signs of slowing down,” Mohanraj said. He singled out Australian coal mining company Whitehaven Coal as a potential beneficiary of the trend because it supplies metallurgical coal to the Indian steel industry. India’s economic growth and infrastructure development have also made real estate an attractive area for foreign investment. As office space continues to grow at a rapid pace, the industry is also benefiting from rising consumer disposable incomes and a desire for larger homes. In real estate, Dotson likes Prestige Estates Projects. The stock, like Whitehaven Coal, is available to U.S. investors through over-the-counter transactions.
