Tuesday, December 2, 2014

For Investors, India Remains Favorite Emerging Market

Kudos to new prime minister Narendra Modi. Thanks to him and Reserve Bank of India chairman Raghuram Rajan, India is the global fund managers favorite emerging market.

Despite a temporary bump in its growth trajectory, London-based investment firm Schroders says India is the best of the big emerging markets for investors.

“The emerging markets are a concern and our earnings outlook for three of the four BRICs is negative, but India is the only bright spot in our view,” writes Alex Tedder, head of global equities for Schroders. He said India, “has an exciting investment story, with exceptional demographics and a vibrant private sector. Although the economy and the market have both done well in 2014, we think they have further to go.”

The Wisdom Tree India (EPI) exchange traded fund is up 33.2% this year while the MSCI Emerging Markets Index is down 0.7% year to date ending Nov. 30.

The Modi government’s policy initiatives have been encouraging, including a stream lining of government bureaucracies. Local infrastructure companies remain a favorite as Delhi continues to tout plans to build much-needed infrastructure in the poorest of the BRIC nations.

Tedder said the Indian consumer should also receive a welcome boost from lower energy prices and reduced inflationary pressure.

India’s growth hit a temporary snag in the second quarter, which runs from July to September for India. GDP grew 5.3% compared to the same period a year ago, beating the consensus forecast of 5.1%. However, this growth follows 5.7% yearly growth in the first quarter.

With this latest data, released to the market last week, India’s first half of fiscal year 2014-15 stands at 5.5% compared to 4.7% last year.

Barclays Capital said on Nov. 28 that India’s GDP should expand this year by 5.7%, ending in April. India’s growth is expected to hit 6% next fiscal year.

The second quarter growth slowed down was largely due to weaker industrial production.