Investment managers discuss India’s promising macroeconomic outlook and investment opportunities in the region.
India is growing in influence on the world stage, and Dina Ting, senior vice president and head of global index portfolio management at Franklin Templeton, believes that its vibrant market is worth paying attention to.
“Indian Prime Minister Narendra Modi recently took the opportunity to further promote several measures aimed at better integrating the “Global South’s” developmental needs and ambitions with that of the G20,” Ting said in a statement this week. Modi announced a new multilateral rail and sea corridor project to connect India with the Middle East and the European Union, describing it as a beacon of partnership and innovation.
“Modi also met with US President Joe Biden, and the two leaders issued a 29-point joint statement which outlined areas of cooperation towards mutually beneficial goals, including resilient global supply chains and scientific and technological research,” she continued.
“Diversifying away from China has also meant a surge of new investment for India, where companies like Amazon, Apple, Boeing, Samsung and Nokia are banking on the country as a formidable manufacturing alternative,” she said. “China’s weaker-than-expected economic recovery furthermore appears to be lending positive momentum to Indian equities, especially among international investors who have favoured smaller, domestically focused companies.”
“Last year, India’s equity market experienced significant outflows, but the tide seems to be turning. At the end of the first quarter, overseas investors saw renewed appeal in Indian midcap stocks,” Ting said. Bloomberg data revealed that India’s equity market received about $15.5 billion in net foreign inflows year-to-date through August, roughly $1.5 billion short of cancelling last year’s record outflow.
India’s gross domestic product (GDP) also expanded 7.8 per cent on an annual basis in the June quarter – picking up pace from the prior quarter when it grew 6.1 per cent. Ting believes this bodes well for smaller, more domestically-focused companies. “Improving infrastructure in the fast-growing economy should continue to attract more multinationals to set up shop, further advancing India’s overall economy and potentially benefiting small- and mid-capitalisation firms,” she added.
Besides infrastructure buildout, financial sector growth and a large population, Ting thinks India’s progress towards transitioning to clean energy is another appealing consideration for investors: “The World Bank recently approved $1.5 billion in financing to accelerate the development of India’s low-carbon energy sector. In addition, the International Energy Agency expects India to surpass Canada and China in the coming years to rank as the world’s third-largest ethanol market, after the United States and Brazil.”
In Ting’s view, India’s structural trends, rising affluence, expanding manufacturing prowess, government reforms and burgeoning influence on the world stage, are compelling growth drivers that investors should be watching closely.
Legal & General IM
Ting is not alone in seeing India’s investment potential. Lee Collins, head of index fixed income at Legal & General Investment Management (LGIM) welcomed JP Morgan’s announcement last week that India, the second largest emerging market government bond market, will be included in its GBI-EM Global Diversified Index. Collins anticipates that the decision to include India in the index will result in significant foreign investor inflows.
HSBC also recently launched its global private banking business in India to serve high net worth and ultra-HNW professionals, entrepreneurs and their families. Surendra Rosha, co-chief executive of HSBC Asia-Pacific, said India’s acceleration as one of the world’s largest and fastest-growing economies is supported by its demographics, digitisation and an enabling policy infrastructure. See more here.
Other international banks with a wealth angle that have targeted India include Switzerland's Julius Baer, Liechtenstein-based LGT, UK-listed Standard Chartered (a longstanding player in the market), Rothschild & Co, and Germany's Deutsche Bank.
According to the International Monetary Fund's world economic outlook, India surpassed the UK as the world’s fifth largest economy in 2022 and is expected to overtake Japan and Germany by 2027/2028. India also overtook China as the world's most populous country in April 2023, the UN Department of Economic and Social Affairs said. The number of ultra high net worth individuals in India – those with more than $30 million to invest – is predicted to increase by 58 per cent by 2027. The wealth opportunity in India is also represented by $2.8 trillion in AuM today, with projected growth of 8 per cent per annum by 2026, HSBC said.