India is future posterchild of emerging markets
The country ’ s stock market is on course to be the world ’ s third-largest yet makes up little more than 10 % of EM indices , meanwhile its $ 2trn fixed income market remains virtually untapped
By Jamie Gordon
International capital markets have yet to scratch the surface of the world ’ s most populated country and fastest-growing multi-trillion-dollar economy , yet asset managers have the Indian “ growth machine ” firmly in their crosshairs . One of the few economies to boast
CHART 1 : GDP GROWTH ( 1990-2023 )
■ China ■ Brazil ■ India ■ Russia
Source : IMF World Economic Outlook 2023
GDP growth averaging more than 5 % a year for the past 20 years , India was the fastest-growing major economy in 2022 and is expected to keep this pace through 2023 and 2024 , according to the IMF ’ s World Economic Outlook 2023 .
This is no mean feat for a country that started its long road to economic liberalisation in 1991 , still ranking 142 out of 190 countries in the World
0 1990 1995 2000 2005 2010 2015 2020
Bank ’ s 2015 Ease of Doing Business report even after decriminalising no fewer than 33,000 of its regulatory compliances for businesses since 2020 alone .
Karim Chedid , head of investment strategy for iShares EMEA at BlackRock , said : “ There is no doubt India is a key growth engine for emerging markets , both in terms of mid and long-term economic growth as well as the rise of the consumer as the population grows and becomes wealthier .
Elsewhere , Alessia Berardi , head of emerging macro and strategy at the Amundi Institute , agreed , adding the rebound of the Indian economy since COVID-19 has been amazing , making it one of the most robust economies across emerging markets .
A nifty equity market
Western investors have already started adding India exposure with foreign fund ownership of Indian equity hitting 19.5 % in 2022 .
However , this ownership of the country ’ s stock market – which Morgan Stanley predicts will be the world ’ s third largest by 2030 – could just be the beginning , given US stocks are currently around 40 % owned by international investors .
Although the Adani Group debacle may have moderated valuations , some investors remain hesitant to include India in their emerging market overweights given its equity is currently “ not cheap ”, according to Chedid .
With last year ’ s price-to-earnings ( P / E ) multiples of 26x – higher than US tech – falling to 19x recently , the country ’ s equity valuations are comparable to the US with negative risk premia .
30 ETF INSIDER | MAY 2023