Keep an eye on India: for Pictet AM, it is crucial for tomorrow's investments

The country's competitiveness is growing and the stock market is booming. pay special attention to Indian companies that are poised to conquer global markets with a mix of digitization and diversification.

India's progress is there for all to see and cannot be ignored right now. At the end of 2022 it managed to become the fifth largest economy in the world, a few weeks ago it landed a spacecraft on the moon, can we believe it? Moon reached by very few excellences in aerospace, the U.S., Russia and China; and in late September it hosted the G20, the first country in the southern hemisphere to do so. But most importantly, India is reaching milestones that should attract investors' attention, according to analysis by Prashant Kothari, senior investment manager at Pictet Asset Management.

STOCK MARKET ON THE RISE

The stock market valuation recently hit an all-time high at $3.8 trillion, and Indian companies are doing better than those in other emerging countries, an overtaking that makes one think a lot about India's global influence lately. "Everything seems to indicate that the gap may widen further in the years ahead: this suggests that Indian stocks should make up a larger share of global equity portfolios," says the Pictet expert. Kothari specifies how the fundamentals of Indian companies are promising, and, in addition, the strength from the diversification of the domestic economy is expanding year by year. Signs of growth are also coming in the technology and digitization sector, particularly in areas such as digital identification and instant money transfer, which enable rural citizens to take advantage of online public services.

IMPROVING PRODUCTIVITY

All of this, Pictet Asset Management's expert points out, is helping to strengthen India's financial inclusion, improve productivity, reduce corruption and, particularly important for investors around the world, make it easier for small businesses to access the credit they need to expand. "In fact, these companies, also known as MSMEs (micro, small and medium-sized enterprises), constitute a large slice of the pie in the Indian economy: in fact, they are credited with 30 percent of India's GDP and more than 40 percent of its exports, a lot of weight in short; yet, more than 90 percent of these businesses do not have access to official credit," Kothari comments. Another strength of Indian companies comes from discipline, both operational and financial. Factors that, combined with digitization and landing on online platforms, make Indian companies globally competitive.

INVESTOR CONSIDERATION

"We expect policies to remain favorable to companies and investors in the medium term, especially since Modi does not want political upheaval before the 2024 general election," says expert Kothari. He also adds that Modi is ready to implement policies to capitalize on India's position as a non-aligned country, which should help India advance its trade and economic interests, especially in strategically important sectors such as energy, defense, technology and pharmaceuticals. In 2023, India's stock market received considerable inflows from abroad, thanks to ample imports, but international investment in the country is still low. "But this may soon change: the argument for a substantial allocation to Indian stocks within a global equity portfolio is now stronger than ever, never before has there been so much buzz among institutional investors ready to choose to invest in the country. The world of Indian companies will provide ample hunting ground for international investors eager to diversify their holdings," Kothari concludes.

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