India has been dubbed the “perfect” emerging market to invest in, but it can be tricky for those outside the country to gain access. CNBC Pro assesses the case for buying into this booming economy, the risks to consider — and how global investors can get involved.
India’s stock market has been making headlines this year, and for good reason.
India’s stock market is now the fourth-largest in the world, as measured by the total value of listed companies, and benchmark indexes have hit successive record highs this year. Its Nifty 50 and BSE Sensex indexes are both more than 20% higher over the last 12 months.
The country’s economy is also on the up. It’s expected to grow 7.6% in the 2024 financial year, with IMF Executive Director Krishnamurthy Subramanian describing it as “easily” the fastest-growing economy in the world.
India even managed to shrug off political concerns around this year’s huge general election, with stocks soon recovering losses despite the failure of Prime Minister Narendra Modi’s ruling Bharatiya Janata Party to secure an absolute majority in the lower house of Parliament.
The bigger picture
India is in a unique position, according to Kevin T. Carter, founder and CEO of emerging markets investment firm EMQQ Global. “India is the perfect emerging market,” he said, speaking to CNBC by video call. “If we go back to why are we investing in emerging markets in the first place, this is the list: There are a lot of people, they’re young, they’re growing, and they want to buy stuff.”
Carter reels off statistics: India’s economy is growing fast (its GDP exceeded analysts’ estimates in the January-March quarter) and access to the internet is rising rapidly – India is the fastest-growing premium smartphone market in the world. Added to this, it has a vast number of young inhabitants: more than 40% of its population is under the age of 25.
“India remains one of the best-performing equity markets this year, underpinned by the world’s fastest-growing major economy and a resilient macro backdrop,” said James Thom, senior investment director Asian equities at Abrdn, in a note to clients.
“There’s a real estate boom, improving consumer confidence, particularly in urban areas, and a robust infrastructure capex cycle, including early signs of a private capex revival. This can potentially sustain both economic momentum and corporate earnings growth.”
Kranthi Bathini, equity strategist at Wealthmills Securities, agreed that the domestic macroeconomic picture looks strong, with both corporate profits and tax revenues increasing.
He acknowledged that some portfolio managers warn valuations look a “little bit stretched,” but said the country’s growth prospects should still prove favorable for overseas investors.
