Investment Professionals

Why consider India for your clients’ portfolios

India’s star is on the rise and if you are considering an emerging markets exposure for your clients’ portfolios, it may be time to revisit India. Global challenges may just be a temporary setback for India, which is forging ahead with growth plans and many nations, including Australia, are seeking to forge closer trade partnerships. Like the broader Asian region is typically attractive to investors in emerging markets, India also benefits from the growth case of a well-documented growing middle-class and economic prospects.

Recovering from the global pandemic

The COVID-19 pandemic has been significant globally, not just from a health perspective but also economically. India was initially hard-hit, implementing one of the harshest and most extensive lockdowns globally1. Cases appear to have peaked in India in September and there are now signs of economic recovery as seen in indicators such as industrial output and energy consumption2. The Indian government has returned its efforts to the future growth of the nation, with key emphasis on its existing plans for infrastructure.

Three key growth drivers

A large and diverse nation, both in population and in region, India’s future is dominated by three key growth drivers.

  1. Infrastructure investment

    The Indian government has committed to US$1.4tr infrastructure investment by 20253. There is also a strong focus on climate and renewables, with the Ministry of Petroleum & Natural Gas announcing in September 2020 that it aims to operate 50% of fuel stations using solar power within five years4. India has also partnered with Japan via the India-Japan Coordination Forum for Development of Northeast for projects in India’s Northeast states5.

    Infrastructure can be an important tool for economic growth as it offers short term benefits such as employment, and longer term benefits in the form of useful water management, ports and roads to improve access and lifestyle for a population as well as businesses.

  2. Reform and fiscal policies

    India has historically been complicated for business operations, but government reforms have assisted in opening the country to internal and foreign business investment.

    The Indian government has also recently passed updated labour codes to simplify laws and compliance processes as well as incorporating a social security fund for gig and platform workers6. These reforms are anticipated to support continued ease of doing business in India.

    The country is also expected to benefit from accommodative monetary policy supporting business investment, along with fiscal spending programs to assist in reducing poverty.

  3. Consumption

    India is expected to benefit from a growing middle-class across Asia and the accompanying economic rise in consumption. It is expected to see the percentage of households in poverty drop from 15% to 5% by 20307.

    This creates an opportunity across industries to target a growing audience of people able to afford more than just the basics and demand better quality goods and services. While international brands are targeting this space, India’s own listed companies have physical and cultural advantages in reaching this audience.

How to incorporate India in your clients’ portfolios

Financial advisers could consider India from a few perspectives.

  • Regional diversification within the core international investments of a portfolio.

  • A tilt towards thematic investments, in this case, the trend for the growth of the middle-class across Asia, within the satellite portion of a portfolio.

  • A growth allocation within either core or satellite portions of a portfolio.

Options for investing

  • Direct investment in Indian companies (noting that the Indian market can be difficult to access)

  • Direct investment in companies with business operations in India which are listed in Australia or internationally.

  • Actively or passively managed funds that focus on Asia, themes relevant to Asia or India, or specifically focus on India.

ETFS Reliance India Nifty 50 ETF (ASX code: NDIA) is the only fund in Australia that offers exposure to the Indian economy via its benchmark index, the NSE Nifty50 Index. NDIA includes exposure to the 50 largest and most liquid companies listed on the National Stock Exchange of India (NSE) and represents more than 60% of the market capitalisation of India.

For more information on investing in India or ETFS Reliance India Nifty 50 ETF (ASX code: NDIA), please speak to ETF Securities.

1 https://qz.com/india/1828915/indias-coronavirus-lockdown-harsher-than-china-italy-pakistan/

2 https://www.businesstoday.in/current/economy-politics/rbi-rate-cut-economic-recovery-covid-lockdown-crisis/story/422035.html

3 Source: India 2030: exploring the Future; National Infrastructure Pipeline

4 https://www.ibef.org/industry/infrastructure-sector-india.aspx

5 https://www.ibef.org/industry/infrastructure-sector-india.aspx

6 https://economictimes.indiatimes.com/news/economy/policy/labour-reforms-intend-to-put-india-among-top-10-nations-in-ease-of-doing-business/articleshow/78257939.cms?from=mdr

7 http://www3.weforum.org/docs/WEF_Future_of_Consumption_Fast-Growth_Consumers_markets_India_report_2019.pdf