Everybody loves an Indian summer, especially investors, and many are piling into the country’s red-hot stock market. Indian shares are up 53.70 percent over the last 12 months, according to MSCI. Investors are making fortunes.
The Indian stock market is streaking ahead of China, where shares have fallen five percent in the year to August 31.
It has even outpaced the super-charged US, despite Wall Street growing 31.86 percent in the year to August 31.
The UK has grown 27.28 percent in a year but also trails. So has Europe, despite growing 29.84 percent, and Japan, up 20.36 per cent.
Global share prices have soared in the wake of the pandemic but India has beaten them all. Investors might want to check their portfolios to see whether they have any exposure to the country’s powerhouse economy.
Past performance is no guarantee of future returns and emerging markets remain volatile, but this looks like a great long-term opportunity.
The Indian economy is in good shape and has recovered from the Covid pandemic much faster than expected, said Jason Hollands, managing director at Tilney Investment Management Services.
It has also benefited from Premier Xi Jinping’s authoritarian crackdown on the Chinese private sector in China.
“This has unnerved investors and many Asian and emerging market fund managers have swung behind India instead,” Hollands said.
Prime Minister Narendra Modi’s business-friendly government is bent on modernising the country by simplifying taxes and reducing bureaucracy.
India is shooting up the World Bank’s annual “ease of doing business” tables, from 142 when Modi came to power in 2014 to 63 today.
Hollands said its public finances are in relatively good shape and it is now embarking on a $1.35 trillion (£1trillion) infrastructure programme.
India has been dependent on imported oil but is looking to be energy-efficient by 2047, to mark the 100th anniversary of freedom from British rule.
Within six years it will have overtaken China to become the world’s biggest country by population, and has an expanding middle class.
Hollands said: “By the end of the decade, India is forecast to be the world’s third largest consumer market, after the US and China. It’s a great investment opportunity.”
More cautious investors could spread their risk by putting money into an Asian or emerging market fund, rather than one that specialises in India.
“Aubrey Global Emerging Market Opportunities has a hefty 43 percent exposure to India. It is up 14 percent over one year and 118 percent over five years.”
Terry Smith’s Fundsmith Equity makes people rich. Maybe you too [INSIGHT]
Get rich slow – invest £50 a month in funds and retire in ease [ANALYSIS]
UK and India agree £900m deal as Sunak lays foundations for trade deal [REVEAL]
For investors who want a pure-play India fund, Hollands tips the Ashoka India Equity Investment Trust, which is up 73 percent over the last 12 months, or the Goldman Sachs India Equity Portfolio, up 50 percent.
Darius McDermott, managing director of Chelsea Financial Services, said India is one of his favourite emerging markets. “Its demographics are good with a young, highly educated population and the government is very pro-business.”
He rates Stewart Investors Indian Subcontinent Sustainability and Alquity Indian Subcontinent, which have both returned around 56 percent in the last year.
Alquity fund manager Mike Sell said the economic outlook for India is positive, but cautioned: “This presumes there is no Covid deterioration and reasonable rainfall during the rest of the monsoon season.”
As ever, only ever invest money in shares for a minimum five years, and preferably much longer to overcome short-term volatility.