How to invest in India, the world’s fastest-growing major economy | Wilnesh News
India has been called the “perfect” emerging investment market, but for those from abroad, accessing the market can be difficult. CNBC Pro evaluates the reasons to buy into this booming economy, the risks to consider and how global investors can get involved. Indian stocks have been making headlines this year, and for good reason. India’s stock market is now the world’s fourth-largest stock market, measured by the total value of listed companies, with the benchmark index hitting record highs this year. Its Nifty 50 index and BSE Sensex have both gained over 20% in the past 12 months. The country’s economy is also on the rise. Growth is expected to be 7.6% in fiscal 2024, which IMF executive director Krishnamurthy Subramanian described as “easily” becoming the world’s fastest-growing economy. India even managed to shake off political worries surrounding this year’s big election, with stocks quickly recouping losses even as Prime Minister Narendra Modi’s ruling Bharatiya Janata Party failed to win an outright majority in the lower house of parliament. Kevin T. Carter, founder and CEO of emerging markets investment firm EMQQ Global, said India is in a unique position. “India is the perfect emerging market,” he told CNBC via video call. “If we go back to why we invest in emerging markets, we see this list: There are a lot of people, they are young, they are growing up, they want to buy things.” Carter listed some statistics: The Indian economy is growing rapidly ( GDP in the January-March quarter exceeded analysts’ expectations), and Internet penetration is rising rapidly – India is the world’s fastest-growing market for high-end smartphones. In addition to this, it has a large number of young residents: more than 40% of the population is under the age of 25. At the same time, Goldman Sachs predicts that consumer spending will grow significantly. It is expected that 100 million people in China will become wealthy by 2027, compared with the current 60 million people. “India remains one of the best-performing equity markets this year, supported by the world’s fastest-growing major economy and a resilient macro backdrop,” James Thom, senior investment director of Asian equities at Abrdn, said in a note to clients. Housing is booming, consumer confidence is growing, particularly in urban areas, and the infrastructure capital spending cycle is strong, including early signs of a recovery in private capital spending. This has the potential to sustain economic momentum and corporate earnings growth. Kranthi Bathini, equity strategist at Wealthmills Securities, agrees that domestic macroeconomic conditions look strong, with corporate profits and tax receipts rising. He acknowledged that some portfolio managers have warned that valuations look “a little too high,” but China’s growth prospects remain good for overseas investors Want to know There are many ways to enter the market and there are many potential opportunities – but there are some caveats for individual investors. , foreign non-Indians are not allowed to purchase stocks directly through online trading platforms, but they can enter the market through mutual funds and exchange-traded funds (ETFs), as well as American Depository Receipts (ADRs) and Global Depositary Receipts (GDRs). – U.S. and global depositary receipts – allow overseas citizens to buy foreign stocks through their home stock exchanges. But Arjun Jayaraman, head of quantitative research and portfolio manager at Causeway Capital, told CNBC by phone. : “A big problem for overseas investors investing in India is the lack of good representation in ADR or GDR. Jayaraman said this is very different from China, for example, where big tech companies like Tencent own American Depositary Receipts. Mutual funds and ETFs “I would advise most people, if they really want to get exposure to… the most exciting things in India Regions can do so through funds,” Jayaraman said. Indian stocks account for 21% of Causeway’s Emerging Markets Fund, second only to China (27.4%). As far as ETFs are concerned, international investors have many options to track Indian indices. Some of the top ETFs in North America include Columbia India Consumer ETF, First Trust India NIFTY 50 Equal Weight ETF, and BMO MSCI India ESG Leaders Index ETF. In Europe, the list includes the iShares MSCI India UCITS ETF (which provides about 85% equity market exposure) and the Xtrackers MSCI India Swap UCITS ETF Capitalization 1C. In Singapore, the iShares MSCI India Climate Transition ETF invests in large and mid-cap companies and focuses on ESG (environmental, social and governance) factors. But Abrdn’s Thom prefers actively managed funds to ETFs. “India is a stock-picking market with many listed companies, including some outstanding small and medium-sized companies that are not included in the MSCI India Index or other mainstream indices such as Nifty,” he said. Another way to enter the country is through the United States Or UK-traded Indian stocks, such as travel company MakeMyTrip, which trades on Nasdaq. Investors can also buy shares in U.S. or European-listed companies that earn significant revenue in India, such as Nokia or broadband provider UTStarcom. India has huge ambitions in manufacturing, infrastructure and technology, with analysts at Bank of America describing the country as the “epicenter of artificial intelligence” in a May research note. Bank of America strategists also expect consumption to grow: “India is likely to see an inflection point in discretionary income that leads to continued lifestyle upgrade spending, like China did six or seven years ago,” they wrote. Citi strategist Surendra Goyal said in a note to investors that he expects strong year-over-year growth in sectors such as energy, autos, utilities and pharmaceuticals, and hinted at “weaker performance in banks, industrials and major sectors” ”. The bank’s March 2025 price target for the Nifty index projects an upside of 7%. Abden likes sectors based on a number of themes, including aspiration — “premium consumption” is growing in cars, food and personal care — and financial inclusion (the country is heavily focused on improving digital access). “Our exposure is across well-capitalized private banks and non-bank financial companies as well as quality insurance companies,” Tom said. EMQQ Global’s Carter is very bullish on internet stocks given the government’s investment in so-called India Stack, which is The country’s “digital public infrastructure” based on its identity program enables instant money transfers and countless other features. His firm’s Internet and e-commerce ETFs include stakes in technology holding company Info Edge and Reliance Industries, a massive conglomerate with interests ranging from oil production to digital services. Potential Risks Politics, Modi’s continued push for reforms, as well as currency fluctuations and stock valuations are all worth considering when investing in India. “The currency has performed very strongly this year,” Jayaraman said. “In the face of high interest rates in the United States, you would have thought India would do worse this year, but it has actually done pretty well.” Year to end-March , the rupee fell 1.5% against the dollar, although this was significantly lower than the 8% decline in 2023. The rupee has since weakened only slightly, although traders said the Reserve Bank of India has been intervening in markets to defend the rupee, according to Reuters. Jayaraman added that Modi’s lack of an absolute majority could mean a higher fiscal deficit if he faces spending pressure from coalition partners. If markets fluctuate, the rupee may come under pressure. “If that’s the case, then central banks will be under pressure to lower interest rates to boost economic growth, which could put additional pressure on the currency,” Jayaraman said. Talking about valuations, Abrdn’s Thom said they It seems a little stretched, and said that India is “relatively more expensive.” “While India’s growth potential is the fundamental reason why investors are willing to pay a premium in this market, one still needs to judge how much investors are willing to pay for this growth,” he said. Some market makers believe Indian stocks are overvalued, Fund manager Jonathan Pines called prices “too high.” Carter also acknowledged the risks. “It’s not going to be easy. I’m sure there will be some hiccups along the way and I think at some point there will be an India bubble. But right now, I just think it’s an unparalleled (opportunity) and it can happen again,” he said explain. Revealed: Reliance Industries is the parent company of Network18 Group, which owns CNBC TV-18 (CNBC’s local partner in India). —CNBC’s Ganesh Rao contributed to this report. Transform your portfolio with expert analyst ratings! Click here to join CNBC Pro.
Chhatrapati Shivaji Terminus Railway Station in Mumbai, India.
Tour and Bruno Morandi | Image Gallery | Getty Images
India has been called the “perfect” emerging investment market, but for those from abroad, accessing the market can be difficult. CNBC Pro evaluates the reasons to buy into this booming economy, the risks to consider and how global investors can get involved.
