A global fund manager has recognised some recent macroeconomic trends occurring in India that should encourage people to once again consider an investment in that region.
Stewart Investors has acknowledged several aspects currently present in India that should provide some solid investment opportunities, the first of which is the indication of a renewed focus on infrastructure and a revival in its manufacturing sector.
“Construction of new roads has continued behind the scenes at a good pace. Private investments and participation have now begun to improve in areas such as airports, gas and power distribution, renewable energy and even parts of the railways. The government has embarked on many difficult but essential reforms in agriculture and labour markets,” the manager observed.
Further, it noted India’s manufacturing industry is showing some promising signs.
“While the government encourages investment in local manufacturing through attractive taxation and labour reforms, the case is becoming stronger from the bottom-up via productivity improvements. A large domestic market, improving infrastructure and the increasing need to diversify global supply chains add wind to India’s manufacturing sails,” it stated.
According to Stewart Investors, another positive sign for India’s economy is the recent strengthening of the property sector.
“Property is more affordable today than at any time in the last 25 years. Tax incentives for affordable housing materially reduce the cost of servicing mortgages. India remains one of the most attractive mortgage markets in the world due to low home ownership, low mortgage penetration and a young population,” it noted.
An additional encouraging element for investors is the improvement and development of India’s financial services framework, the wealth organisation pointed out.
In particular it highlighted the establishment by the government of the open payments platform, called Unified Payments Interface, as evidence of this improvement.
“A common architecture socialises an important digital railroad [such as this]. Currently, 376 banks and payment service providers use this railroad to offer easy and low-cost payments and transfers for society. In other markets, this infrastructure is often owned by private entities such as Visa and Mastercard, leading to higher costs for the ecosystem and slower adoption,” the firm said.
All of these factors led Stewart Investors to make the following conclusion.
“[India] is a region which demands patience but rewards patient investors through steady compounding of returns. In our opinion, a large domestic market, evolving macro tailwinds, a clear confluence between sustainable development opportunity and investment returns, an accountable system with checks and balances and a universe of high-quality companies makes India an attractive destination for long-term capital in our opinion,” it said.
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