India: An Emerging Market Unlike the Others

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We’ve all heard about the tremendous long term growth opportunities that China’s growing economy offers.

But today I want to tell you about a different opportunity…one that might be just as lucrative in the coming decade as China was in the last.

The World Bank, the IMF and economists at Goldman Sachs say that within the next few years India’s economy will grow at a faster rate than China’s. Here’s what you need to know…statistics released this week revealed that this is already the case. India’s GDP rose by 7.5% in 2014, faster that China’s 7.3% growth over the year.

That’s right — India’s economy is now growing at a faster rate than China’s.

Some commentators advise that you avoid investing in emerging markets altogether. That’s because the strengthening US dollar and falling commodity prices are causing concern that emerging market economies will come under pressure in the short term — at the very least.

However, India isn’t vulnerable to these factors to the same extent as other emerging markets.

Take the recent crash in oil prices for example. Emerging market oil exporters Brazil and Russia have felt the pain of a barrel of crude halving in less than a year. But it’s great news for India, which imports 80% of the oil it consumes. This has done an excellent job of reigning in inflation and encouraging economic growth.

We have seen the oil price bounce in the past few weeks, but Citigroup is confident the surge in price will reverse because the oil market is oversupplied. The bank says crude oil could go as low as $20 per barrel — it’s at $50 today.

This all bodes well for India’s stock market

Just take a look at the Bombay Stock exchange benchmark index over the past three years. Since January 2012, India’s stock market has returned investors 82%. And all signs suggest it has further to run.

The Albert Park Investors Guild‘s Emerging Market Analyst, Ken Wangdong, has high hopes for India. Ken sees every reason to back India and says, ‘A mix of fundamental growth, industrialisation and what I call the ‘Modi factor’, or economic reform, in India will propel the nation forward.’

The ‘Modi factor’ refers to India’s Prime Minister, Narendra Modi, who was elected last May, and his business friendly reforms. Modi’s is looking to transform India with improvements to the labour market, infrastructure, and fighting corruption.

Legendary investor Jim Rogers has also recognised that Modi had done a lot of good for India. And he complemented India’s central bank on its decision to cut interest rates, ‘They seem to understand what needs to be done. And they are doing a better job than most. I wish the Reserve Bank of India were running the U.S. Federal Reserve."

And there are many other reasons to expect India’s economy, and its stock market, to continue to perform. The increasing urbanisation of India’s 1.2 billon people presents a lot of opportunities. Consider that 50% of all Chinese are ‘urbanised’, and that rate is still rising, while the rate of urbanisation in India remains less than 33%.

So how can you get in on the action?

Well that’s where it gets a big tricky. There currently aren’t any ASX-listed investments tracking the broad performance of the Indian stock market.

It is a bit disappointing since we have ETFs that track the performance of much smaller economies’ stock markets, including that of Taiwan, Hong Kong, South Korea, and Singapore. The closest option available here is to buy one of the ETF’s that track the performance of BRIC markets (Brazil, Russia, India, and China) combined.

But with an international trading account, you have access to the much wider range of ETFs that are available on foreign exchanges.

Listed on the NYSEArca exchange, the iShares MSCI India [NYSE:INDA] is a great option to invest in the Indian market.The ETF tracks the benchmark SENSEX Index — that’s the one on the chart above — and provides good investment exposure to the overall Indian market.

Another option is the Market Vectors India Small-Cap [NYSE:SCIF]. Also listed on the NYSE, this ETF aims to match the performance of small-cap Indian stocks index. It includes companies that generate 50% or more of their income from India, including those listed elsewhere.

Readers of Ken’s New Frontier Investor are familiar with his recommendation that will play a key role in the continuing rise of India. The NYSE-listed banking stock is set to take advantage of the country’s growing economy and rising household wealth. While it’s certainly more risky than investing in an index tracking ETF, it has massive upside potential. It’s already gained 20% since Ken recommended it to his readers in October. And you can add another 13% in foreign exchange gains to that.


Meagan Evans
Investment Director, Albert Park Investors Guild

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Meagan Evans
Meagan Evans, has seen from the inside of the investment industry how easy money can lead to bad management decisions. She holds a degree in Finance and a Master’s in Business Administration and, as a Certified Financial Technician, Meagan employs both technical and fundamental analysis to make solid investment decisions

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