India, like all other markets, has been deeply affected by COVID-19
However, this has now reset company valuations to highly attractive levels
When the markets begin to recover there are strong reasons to believe India can ﬂour-ish anew
One of the easiest, most cost-efﬁcient ways to get exposure to India for Australians is via the ETFS-NAM India Nifty 50 ETF (ASX Code: NDIA)
India: Current State of Play
In the past month, the Indian stock market has undergone one of the sharpest corrections in history. Growth forecasts have seen sharp downgrades and India is no exception, with expected weakness for the remainder of the year. While these concerns are real, global policymakers have responded to this crisis with unprecedented levels of monetary and ﬁscal stimulus. Still, the panic in the market is visible in record levels of volatility which has led to deep cuts across most sectors.
Market Valuations Return to GFC Levels
After this sharp correction, market valuations have returned to near record lows not seen since the GFC.
(Source: Blomberg & IMF Estimates)
Policy support is expected to continue for a prolonged period and it is hoped that the COVID-19 epidemic will begin to subside in the second half of the year. With this in mind and given valuations are at near record lows, it seems the fallout of this epidemic is already priced in. While nobody can predict the extent to which the markets will continue to fall, or how long it will take for the current situation to return to normal, most market experts agree that current market valuations are attractive. Therefore, this could represent an attractive buying opportunity for long-term investors.
Why India can recover
Fiscal Response: If the COVID-19 epidemic results in prolonged lockdown a ﬁscal stimulus of at least 2% of GDP is likely. As an example of past stimulus, during the GFC additional expenditure amounting to 3% of GDP was provided
Strong Monetary Response: The RBI is expected to cut rates by at least 100bps, with the ﬁrst rate cut of 75bps announced on the 30th of March
Rapid sequential growth for H2: Given India is a domestic consumption country, assuming COVID-19 can be contained and the lockdown laws lifted, consumption can pick back up rapidly, without the reliance on international inﬂows
Access To India: ETFS-NAM India Nifty 50 ETF (ASX Code: NDIA)
One of the simplest ways to access the Indian stock market is through the ETFS-NAM India Nifty 50 ETF (ASX Code: NDIA). NDIA tracks the Nifty50 Index, providing exposure to the top 50 large-cap Indian companies (covering approx. 60% of the Indian market), most of which are currently available at their multi-year lows.
Advantages of investing in the NSE Nifty50 index:
Eliminates non-systematic risks like stock picking/portfolio manager selection Provides building blocks for portfolio construction
Provides exposure to the top 50 blue chip companies who are, potentially, less likely to feel the long-term effects of the COVID-19 shutdown
For more information on ETFS-NAM India Nifty 50 ETF, visit our NDIA product page.