MARKET OUTLOOK

The investment case for India

3 reasons to consider Indian equities

Hugh Arnold
Hugh Arnold
Investment Strategist
EMEA iShares ETF and Index Investments
June 2018

Key points:

  • iShares have launched the first and only physically-replicating UCITS ETF offering India exposure.
  • The Indian market is a key building block for most MSCI Emerging Markets benchmarks and in our view is an increasingly attractive investment opportunity.
  • In light of recent access restrictions to Indian futures, the traditional access route to this exposure will change.

Capital at Risk: All financial investments involve an element of risk. Therefore, the value of your investment and the income from it will vary and your initial investment amount cannot be guaranteed.

Investing in India is looking more and more attractive. A stronger growth outlook has boosted earnings expectations, while a domestic focus on structural reform could provide a cushion against any global trade headwinds later in 2018.

Indian growth is picking up

A brightening Indian economy has boosted earnings growth expectations in the country to 21%, which stand above the broad MSCI Emerging Market expectations of 13%. The IMF sees India as the fastest growing major economy in the world this year and in 2019.

IMF growth forecasts, 2017-2019

Source: International Monetary Fund, April 2018. There is no guarantee that any forecasts made will come to pass.

Government is finally making progress on domestic reform

India has made significant progress on reforms, which have added to the positive growth outlook. Cutting down on government subsidies, while also tackling issues including non-performing loans and recapitalisation of the banking sector allows for increased private sector investments as well as a somewhat overdue capex recovery. In our opinion, policy goals including bringing the informal economy into the formal economy, and measures aimed at financial penetration are supportive of the long-term growth view.

India has a low reliance on global trade

India’s relatively low dependence on global trade, as well as stronger earnings expectations, could provide a buffer against any potential trade related shocks later on in the year.

Trade as a percentage of GDP, 2008-2016

Source: World Bank, May 2018

Investing in Indian equities though ETFs

If you decide you would like to gain exposure to India, an ETF could offer an efficient way of doing so. ETFs are designed to track the performance of an index – thereby providing exposure to many different securities in a single investment.

Capital at risk. All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

Investors should note that compared to more established economies, the value of investments in emerging markets may be subject to greater volatility due to differences in generally accepted accounting principles or from economic or political instability. Overseas investments will be affected by movements in currency exchange rates.

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This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. The opinions expressed are as of 24 May 2018 and are subject to change at any time due to changes in market or economic conditions.