Investment Professionals

India: A Long-Term Opportunity Amidst the Current Panic

Key highlights

  • 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 Reliance 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.

dbcfcd916faa4e17a1f3bf8dacc5ec49.jpg

5dec982297584938ab74d27d0c11fbbc.jpg

(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 [1]

  • 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 [2]

  • Rapid sequential growth for H2: Given India is a domestic consumption country, assuming COVID-19 can be contained and the lock down laws lifted, consumption can pick back up rapidly, without the reliance on international inflows [3]

Access To India: ETFS Reliance India Nifty 50 ETF (ASX code: NDIA)

One of the simplest ways to access the Indian stock market is through the ETFS Reliance 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 Nifty 50 index:
  • Low cost

  • 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 shut down

For more information on ETFS Reliance India Nifty 50 ETF, please contact us on:

Sales

Trading

Phone +61 2 8311 3488

Email: sales@etfsecurities.com.au

Phone +61 2 8311 3483

Email: primarymarkets@etfsecurities.com.au