Kanish Chugh
The Indian economy moved past the United Kingdom’s into fifth place in the world economic rankings this month and some commentators have forecast that it could be the world’s third largest economy by 2030[1]. This sustained economic growth is reflected in the strong relative performance of the Indian share market.
Surprisingly, India is underweight in many emerging market (EM) funds, held back by an outdated view that its infrastructure is poor, its level of poverty higher than other EM economies and that its government processes make change difficult.
ETF Securities Head of Distribution, Kanish Chugh, says this view fails to take into account the significant progress that has been made.
India’s economic performance is built on a series of structural changes, including labour reforms, changes to the country’s tax base, bankruptcy reform and the controversial “demonetisation” program of 2016 to restrict the shadow economy and the use of counterfeit cash.
Chugh says: “The implementation of these reforms had some adverse impact in the short term but now the Indian economy is primed to benefit.”
The Indian Government’s plan to develop the country as a manufacturing centre is bearing fruit, with the new Apple iPhone to be built in India and not China.
“India has moved up slowly, compared with some other emerging market economies. It is the largest democracy in the world and it does take time for change to flow through,” Chugh says.
In June, the World Bank issued its latest Global Economic Prospects report[2], which included forecasts for Indian GDP growth of 7.1% in 2023 and 6.5% in 2024. These are the highest forecasts in the survey.
India’s leading equity market benchmark, the NSE Nifty50 Index, has performed well, returning 3.1% over the 12 months to the end of August and 14% a year over the past three years.
The MSCI Emerging Markets Index is down 21.5% over the past 12 months and up just 3.1% a year over the past three years. The MSCI Word Index is down 14.7 per cent over the past 12 months and up 9.3 per cent a year over the past three years.
ETF Securities’ ETFS-NAM Nifty 50 ETF (ASX Code: NDIA) tracks the NSE Nifty50 Index. Top stocks in the ETF include energy, retail and telecommunications conglomerate Reliance Industries, the world’s tenth largest bank HDFC Bank and global IT consultancy Infosys.
Chugh says: “NDIA invests in the 50 largest companies in India, which account for 60 per cent of the total India equity market. Forty-five per cent of that Nifty50 Index is related to consumption. You are buying India for the domestic consumption story and that is what’s going to drive the growth of the economy there.
“There are very positive signs for a number of emerging economies but the size of the country makes India compelling. It has a population of 1.3 billion and a growing middle class and investors should not look past that fact,” adds Kanish.
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