In recent years, some of the world’s leading CEOs, investors, and economists have identified India as one of the most promising investment destinations. Many international companies have already committed significant amounts of long-term capital to the country.
While many Western economies are burdened with debt and struggling to achieve growth, akin to running up a down escalator, India presents a stark contrast. Previous high-flying emerging markets like Russia and China have faced well-documented challenges. In contrast, India continues to outperform expectations, driven by robust local and global trends that have been developing for years and are projected to accelerate in the coming decades. Importantly, India is seen as having the most predictable growth trajectory, thanks to the strong forces propelling its economic expansion.
Domestically, India’s growth is supported by some of the most favourable demographic trends in the world. Unlike many other countries, India boasts a young and ambitious population that is expanding rapidly. As the population becomes increasingly urban and middle class, there is a rising demand for consumer goods, healthcare, financial services, and entertainment. This growing affluence creates significant revenue opportunities for companies meeting these needs. Additionally, India is poised for decades of infrastructure investment, with the government focusing on upgrading its railway, power, water, and road networks.
India is seen as having the most predictable growth trajectory, thanks to the strong forces propelling its economic expansion.
Internationally, India has firmly established itself as the ‘Office to the World,’ providing outsourced solutions to numerous Western companies. This role is expected to expand, with India increasingly becoming the ‘Factory to the World’ as well. The country benefits from a highly skilled and technologically advanced workforce capable of producing globally demanded products in sectors such as pharmaceuticals, aerospace, and automotives at competitive prices. Additionally, India is well-positioned to capitalise on the world’s growing demand for renewable and sustainable energy.
This momentum is being rewarded by terrific returns in stock markets. Whilst there will doubtless be volatile times ahead as with all stock markets, we at Cohesion Asset Management Limited believe the future for long-term investors is bright. India is already the 5th largest economy and 4th largest stock market in the world and that’s before it is forecast to generate more growth in the coming decade than in its entire history. In many ways India is simply too big to ignore, as it is now more akin to a continent in terms of its size, population or stock market capitalisation.
For many years, investors have often avoided making a separate allocation to Indian equities, opting instead for exposure through general emerging market or global equity funds.
We believe this approach is flawed for two main reasons. First, India typically constitutes only a small portion of such funds. Given the bright long-term prospects for India, it seems unwise to allocate only a minimal amount of a growth-focused portfolio to the country. Second, a manager of an emerging market or global fund, no matter how skilled, can only maintain a broad, generalist understanding of the Indian market. They might spend a few hours each week researching or visit the country annually, but this level of engagement is limited. This is why we advocate for considering a specialist fund with exposure to Indian equities. This could offer investors exposure not only to major companies with dominant positions in key industries poised for significant growth but also to promising, lesser-known opportunities.
The Indian political landscape also appears notably stable. It is certainly more so than in many major Western countries. Recently, Narendra Modi secured a historic third term as India’s Prime Minister, bolstered by a strong majority and enduring coalition partners. This solid political footing gives him a robust platform to advance his agenda for the country’s growth and modernisation. His campaign slogan, “The past decade was just a trailer. There is plenty more to come,” encapsulates his vision for the future. At Cohesion Asset Management, we share his optimism about what lies ahead.
Spike Hughes
Founder & CEO at Cohesion Asset Management Limited
The value of securities and the income from them can fall as well as rise. Past performance should not be seen as an indicator of future returns. All views expressed are those of the author and should not be considered a recommendation or solicitation to buy or sell any products or securities.
