BARING INDIA: Reformer Modi helps make India a 'compelling' case for investors
Like in all emerging markets, the Indian stock market is not for the faint hearted. Its performance since Hindu nationalist Narendra Modi became prime minister a year ago is evidence of the roller-coaster ride that investors can enjoy – and sometimes endure.
When Modi swept to power, with his Bharatiya Janata Party winning a parliamentary majority, the stock market soared in anticipation of the effect he would have on India’s economy.
Yet since the Sensex Index, which tracks the fortunes of India’s top firms, peaked early this year, equities have fallen fast. The falls were caused by investors taking profits after an exceptional 2014 and by disappointment with earnings growth.
Despite recent market volatility, investment experts – and, understandably, managers running Indian equity portfolios – still believe India presents opportunities for bravehearts.
Jason Hollands of fund specialist Tilney Bestinvest is firmly in this camp. He says India is a ‘bright spot’ among emerging markets and says its share valuations are now more in line with longer-term trends, providing a better entry point for long-term investors.
Change: Shares surged when Narendra Modi was elected
This view is shared by Ajay Argal, head of Indian equities at Baring Asset Management. He manages Baring India, one of several Indian investment funds run by top investment houses.
Argal says the investment case for India remains compelling – an economy growing at between seven and eight per cent a year and many of India’s leading firms enjoying double-digit profits growth.
With Modi, a renowned economic reformer, running the country for four more years, he says India remains ‘one of the best investment stories in the world’.
Argal has already been impressed by some of Modi’s reforms – for example, allowing private-sector mining in the coal industry and permitting foreign insurers to own a slice of domestic companies.
Argal’s fund holds shares in 29 firms, all Indian. He can also buy shares in those listed in Pakistan, Bangladesh and Sri Lanka.
For investors wanting equity exposure to India but who are not comfortable with a pure Indian fund, an emerging markets or Asian fund may be better. Laith Khalaf of fund broker Hargreaves Lansdown suggests First State Asia Pacific Leaders, which has 20 per cent exposure to India.
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