Even before the curtains finally came down after a very long and drawn out Indian election, investors had already been voting with their wallets. They expect significant and positive changes to take place in the world’s tenth largest economy. For many years, India and China had been running neck and neck in terms of their respective economic growth rates. But while China’s economic expansion is still powering ahead at a mouth-watering 7.5% a year, India’s annual growth rate has slipped to just 4.7%. But with signs that structural changes might be looming on the horizon and foreign investments welcome…
Even before the curtains finally came down after a very long and drawn out Indian election, investors had already been voting with their wallets. They expect significant and positive changes to take place in the world’s tenth largest economy.
For many years, India and China had been running neck and neck in terms of their respective economic growth rates. But while China’s economic expansion is still powering ahead at a mouth-watering 7.5% a year, India’s annual growth rate has slipped to just 4.7%.
But with signs that structural changes might be looming on the horizon and foreign investments welcome in the world’s largest democracy, now might be a good time to give the Indian market a good once-over.
Am I too late?
Some might say that it may already be too late. After all, the Nifty Fifty breached 7,000 points for the first time this week. Meanwhile, the benchmark Bombay Stock Exchange Sensex Index also hit an all-time high.
What’s more, the Indian rupee, has climbed to a 10-month high. So, Indian shares are definitely not as cheap today as they were this time last year.
Currently, the Indian stock market is valued at around 15 times earnings. That is quite pricey.
However, much depends on what happens next in India. It hinges on the Modi government’s ability to kick start the economy and create more jobs. It also depends on whether the next administration can find a way to bring down inflation, which at the moment is being held at bay by cripplingly-high interest rates of 8%.
Vote of confidence
That said, investors appear to be prepared to give Indian shares their vote of confidence. One way that Singapore investors can get exposure to Indian equities could be through the wide number of managed funds on the market.
But a better way might be to decide on the level of exposure that you really want and look for Singapore shares with just the right hint of Indian flavour.
For instance, Wilmar International (SGX: F34) generates around 3% of its annual revenues from India. Some might say that is more than enough exposure they will ever need. But if you are looking for more, Golden Agri-Resources (SGX: E5H) generates about 7% from the country.
If you are looking for even more targeted exposure through a Singapore stock, then Ascendas India Trust (SGX: CY6U) might fit the bill. The company operates five Information Technology parks in India. They include Bangalore and Hyderabad, which are the third and fourth most populous city in India, respectively.
Look to America
Another way to get exposure to India could be through Indian companies that are quoted on the American exchange as American Depository Receipts (ADR). These ADRs are securities issued by a custodian bank that represent a specified number of foreign shares, which in this case would be shares of an Indian company.
Two of India’s largest banks, namely ICICI Bank, which has a network of over 3,000 branches, and HDCF Bank are listed as ADRs. Technology consultant, Infosys, which is India’s fifth-largest listed company, is also quoted as an ADR.
Tata Motors, which owns Jaguar Land Rover, is another well-known company that is available as an ADR. The carmaker operates six plants in India in addition to car manufacturing operations in Argentina, Thailand and the UK. Last year, the company announced that it would be selling in India the mini-CAT, which is a car that runs on compressed air.
However, if all you want is blanket exposure to Indian equities, then the iShares MSCI Exchange Traded Fund (SGX: I98) might fit the bill. The ETF, which tracks the MSCI India Total Return Index, owns many of the ADRs mentioned above. Its other top holdings include oil and gas outfit Reliance Industries, fast-moving consumer goods company ITC and industrial engineer Larsen & Toubro.
India has the potential to be an Asian powerhouse that could compete head-to-head with China. However, unlike China, which is a command economy, India is an open democracy. This means that developing the Indian economy could take time. Investors looking to capitalise on India’s progress, therefore, need to be patient. And patience in this instance could mean ten years or more.
A version of this article first appeared in the Independent on Sunday.
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