India is positioned as one of the countries with the greatest development prospects. A valid alternative to China for investors looking at emerging markets.
The strong downtrend in China has undermined the performance of the indices linked to the EM (Emerging Markets), generating strong discontent among investors. Benchmarks excluding China also failed to outperform the S&P 500, despite the risk of investing in developing markets being substantially higher.
In an uninspiring stock market environment, the Indian stock market stands out. The strong growth recorded by the emerging country’s shares has made it popular among the stock market public and there is now much discussion about investing in India, considered by many to be the "new China". Indeed, India’s GDP grew much more than expected last year, outpacing Beijing.
But is it really like that?
What is India’s added value compared to China?
According to data from JPMorgan, GDP increased on average by more than 6% per year, in real terms, in the decade before the pandemic. The World Bank and the OECD forecast a continuation of the growth rates of previous years, for both 2024 and 2025, of 6.0%. Growth prospects are supported by demographics, as India is the most populous nation in the world. Consumption expectations stimulate the country’s productivity and, for this reason, the analysts’ focus remains on services supporting consumption, such as financing.
Why does this make sense from a portfolio perspective?
India has historically shown relatively low correlation compared to other markets, particularly compared to the United States, and this represents enormous value for many when considered from a portfolio perspective. Taking BlackRock’s ETF as a reference, the iShares MSCI India ETF, we observe that the Indian stock market has significantly outperformed other geographic equity segments of emerging markets in recent years, including those related to equities Chinese, which instead recorded significant reductions in the capital account. The India-themed ETF has recorded a performance of 92% over the last 5 years, replicating the performance of the MSCI India benchmark.
The S&P 500 has recorded a +104% over the last 5 years. China, on the other hand, has recorded a return of 11% in the last 5 years.
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Which companies to monitor in India?
The most represented companies in India-themed funds are typically Reliance Industries, ICICI Bank and Infosys. These three companies are highly appreciated by the investing public and represent the largest capitalizations on the country’s stock market. They have P/E typical of emerging market companies: the first has a P/E of around 28, the second of 17, and the third of 27, with multiples in this case slightly higher than the EM average. The iShares MSCI EM UCITS ETF has a P/E of 14, due to the strong depreciation experienced by China in recent years. So, it is also worth considering that there is some euphoria in the Indian stock market right now.
| DISCLAIMER The information and considerations in this article should not be used as the sole or primary basis for making investment decisions. The reader maintains full freedom in his own investment choices and full responsibility in making them, since he alone knows his risk propensity and his time horizon. The information contained in the article is provided for informational purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public for savings. |
Original article published on Money.it Italy 2024-02-29 14:21:00. Original title: India o Cina? Ecco dove conviene investire
