3 reasons to invest in India

Embrace India’s improving fundamentals

The Indian equity market confounded sceptics in 2021 with its stellar performance despite negative covid-related headlines. Going forward, an improving economic outlook, new opportunities from digitalisation and a wide universe for stock pickers are some reasons why investors may want to pay more attention to one of Asia’s most diversified equity market.

An improving outlook

India’s economy is expected to grow 9% in FY2022, making it the fastest-growing economy within the Emerging Markets in 2022. A similar optimistic trend was also forecasted by the World Economic Forum, which predicted that India’s economy would grow by 7.1% in 2023.

Contributing to this optimistic outlook is increased vaccination rates that have boosted mobility and consumption. India’s large domestic economy potentially offers some resilience at a time when the outlook for global growth appears uncertain. That said, higher oil prices risk pushing up India’s inflation rate as it relies heavily on imported oil to support economic activities. For now, India’s record level of foreign exchange reserves may provide some buffer and help keep the rupee stable.

Digitalisation create new opportunities

Did you know that India’s digital economy was predicted to reach USD1 trillion by 2026? The high figure is due to the thriving Indian e-commerce market that is forecasted to reach USD74.8 billion this year alone, experiencing a 21.5% increase from 2021. The country has added 480 million Internet users in the last five years. With more affordable data plans, the country has seen a rapid pace of digitalisation. And this can lead to increased productivity, higher economic growth, and employment opportunities in new sectors such as ed-tech, fin-tech and e-commerce.

In the manufacturing context, digitalisation has also honed local capabilities and connected these manufacturers with global partners in the pandemic, as they sought supply chain alternatives.

A wide universe for stock pickers

India is one of Asia's most diversified equity markets, with sizeable sectors that derive revenues from both within and outside of India. This makes it attractive for investors, especially for stock pickers.

Moreover, its digitalisation efforts offer several opportunities for industries to pivot and embrace the online market, allowing companies to reach out to new markets but at a lower cost. Essentially, creating new business models to thrive.

Beyond digitalisation, there are also opportunities in old economy sectors. Homes have become extremely affordable and a recovery in the real estate sector can lift spending and benefit the banks, construction as well as cement companies.

For more insights on India’s recovery, read our thought leadership piece here.

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