India’s economy has been described as a sleeping giant that, when awakened, will become a significant force. India is currently the most populous country and the fastest growing economy among the world’s largest nations, attracting attention from international investors. Despite facing some challenges, the country possesses the necessary elements for a promising future, and its trends are moving in a positive direction. In recent years, India’s economy has shown significant growth.
The Indian stock market has received attention from market strategists due to its strong performance and is considered the fifth largest in the world. The National Stock Exchange of India is also recognized as the world’s seventh largest exchange. India’s market has outperformed China’s market by nearly 130% since the pandemic lows. The country’s nominal GDP growth is expected to be one of the highest globally this year.
India’s economy is characterized by its slow modernization and integration into the global economy compared to other Asian countries. As a result, its per capita GDP is considerably lower than that of other major emerging markets and G7 nations. Since 2014, India’s economy has undergone liberalization and modernization under Prime Minister Narendra Modi, resulting in increased foreign investment and accelerated economic growth. India’s large population, low GDP per capita, and ongoing modernization suggest significant potential for further growth. Furthermore, India’s youthful and expanding population presents opportunities, as it does not face the same demographic challenges as China.
India’s stock market lists over 2,000 companies, with approximately 500 valued at over $1 billion. While there has been active local investor participation for some time, global investors are only beginning to discover this market. Various sectors stand to benefit from India’s economic growth and export of goods and services. Industrialization necessitates investment and infrastructure development, benefiting companies involved in finance, construction, materials, transport, and utilities.
As the middle class grows, there is increased spending on consumer goods and services, healthcare, and real estate. Banks play a pivotal role in financing these developments and are often considered a favorable investment in emerging economies. India’s export-oriented companies are vibrant in technology, pharmaceuticals, biotech, and auto industries.
However, India’s industrialization and modernization face challenges such as a significant informal economy, bureaucratic regulatory landscape, corruption, inadequate rural infrastructure, an underdeveloped education system, low female participation in the formal economy, and challenges related to urban migration.
Insight: Adopt a Long-Term Perspective
There are several reasons to feel positive about the Indian market in 2024. Economic growth is expected to be high in both relative and absolute terms, and the likelihood of rate cuts is promising. However, India has also emerged as one of the most popular markets, and valuations could easily outpace fundamentals.
As mentioned, India’s growth narrative still has a long way to unfold, so there’s no need to pursue prices. With regards to India, it’s beneficial to adopt a long-term perspective and seek opportunities that can yield returns over the next few decades rather than just the next 12 months.
Imagine envisioning India in 5, 10, or even 15 years. How does it appear?
👀 What is the state of the economy?
💹 Has it experienced significantly more growth than it has today?
🚧 Has it overcome the current challenges it’s facing?
📈 Most importantly, have the companies “grown into” what their 2024 valuations were suggesting?
If you have a positive outlook on the country and want to tap into its growth but are uncertain about when to invest, you could:
Consistently invest each month in an India ETF that aligns with your requirements and criteria, if you don’t feel confident about assessing stock values (to manage volatility if the market fluctuates).
If you feel confident enough to assess individual stocks, you can evaluate the major holdings within an ETF and appraise these companies individually. Then, establish a reasonable valuation for each and use this as a benchmark for when you purchase the ETF, in order to capitalize on potential market volatility.
- Investing in India through ETFs is the most practical approach for many international investors. The major funds and their respective number of holdings are as follows:
- iShares MSCI India ETF (INDA) – 133 holdings
- WisdomTree India Earnings Fund (EPI) – 481 holdings
- iShares India (INDY) – 52 holdings
- First Trust India NIFTY 50 Equal Weight (NFTY) – 52 holdings
- Franklin FTSE India ETF (FLIN) – 215 holdings
- Franklin FTSE India UCITS ETF (FLXI) is listed in Europe.
Furthermore, there are numerous ETFs that focus on specific sectors and themes within the Indian stock market.
