Why India could provide long-term profits

WHILE India, like almost all nations, has been badly affected by coronavirus, some investment experts believe the country’s stock market provides investors with the prospect of good longterm returns.

It should prosper, they say, as India looks to overtake China in the next 20 years as the world’s largest economy with consumer spending expected to quadruple to $6trillion (£4.9trillion) by 2030.

Jason Hollands, a director of wealth manager Tilney, is a big fan of India. He says: ‘I am especially positive of the long-term potential for India which has a very attractive demographic profile. Over half the Indian population is under 25 and the average age is 29, compared to 40 in the UK and over 48 in Japan.

‘The country is also benefiting from a rapid expansion in the middle-classes and has enjoyed a relatively prolonged period of political stability and meaningful economic reform.’

The election of Prime Minister Narendra Modi in 2014 did much to revitalise the Indian economy. He instigated sweeping business reforms which fostered a new entrepreneurial spirit, leading to the creation of new businesses and a determination for the country to become the centre of the global supply chain. ‘We are rolling out the red carpet for all global companies to come and establish their presence in India,’ said Modi earlier this month. ‘Very few countries will offer the kind of opportunity that India does.’

As manufacturers look to reduce their reliance on economies such as China, especially with the rise in geo-political tensions, India is emerging as a viable alternative.

Apple is one of several global brands to establish a large manufacturing base in India, recently shifting a fifth of its Chinese-based production there. Industries such as IT, telecoms and technology are rapidly growing. The significant Covid-led increase in people working from home and the widespread business use of technologies such as video conferencing and cloud storage will boost these sectors further.

Investment fund scrutineer FundCalibre has identified three Indian funds that it believes are well suited to take advantage of any rise in Indian share prices. They are Goldman Sachs India Equity Portfolio, IIFL India Equity Opportunities and Stewart Investors Indian Subcontinent Sustainability.