Investors Set Their Sights on India's Growing Appeal
Investment managers are turning their attention to India as it emerges as a compelling destination for investment due to its promising macroeconomic outlook and numerous opportunities in the region.
Dina Ting, Senior Vice President and Head of Global Index Portfolio Management at Franklin Templeton, highlights India's increasing global influence and vibrant market. Indian Prime Minister Narendra Modi's recent initiatives, such as the multilateral rail and sea corridor project connecting India with the Middle East and the European Union, have garnered attention. Modi's meetings with US President Joe Biden have resulted in joint statements outlining areas of cooperation, including resilient global supply chains and scientific and technological research.
The trend of diversifying away from China has led to increased investment in India, with companies like Amazon, Apple, Boeing, Samsung, and Nokia viewing the country as a formidable manufacturing alternative. India's equity market, which saw significant outflows last year, is experiencing renewed interest from overseas investors. Bloomberg data indicates that India's equity market has received approximately $15.5 billion in net foreign inflows year-to-date through August, nearing last year's record outflow.
India's gross domestic product (GDP) grew by 7.8% on an annual basis in the June quarter, indicating an economic upswing. This growth is expected to benefit smaller, domestically-focused companies, especially as infrastructure development attracts multinational corporations to set up operations in India.
Ting also highlights India's progress in transitioning to clean energy, with the World Bank approving $1.5 billion in financing for the low-carbon energy sector. India is predicted to become the world's third-largest ethanol market, according to the International Energy Agency.
Investors are closely watching India's structural trends, rising affluence, expanding manufacturing capabilities, government reforms, and increasing global influence as compelling drivers of growth.
Legal & General Investment Management (LGIM) is among the firms recognizing India's investment potential, particularly with JP Morgan's recent decision to include India in its GBI-EM Global Diversified Index. This move is expected to bring significant foreign investor inflows.
HSBC has also launched its global private banking business in India to serve high-net-worth individuals and ultra-HNW professionals, acknowledging India's status as one of the world's largest and fastest-growing economies.
Numerous international banks with a wealth management focus, including Julius Baer, LGT, Standard Chartered, Rothschild & Co, and Deutsche Bank, have targeted India as well.
According to the International Monetary Fund's world economic outlook, India surpassed the UK as the world's fifth-largest economy in 2022 and is projected to overtake Japan and Germany by 2027/2028. India's population also recently exceeded China's, making it the world's most populous country. The number of ultra-high-net-worth individuals in India is expected to increase by 58% by 2027, and India's wealth management industry, currently overseeing $2.8 trillion in assets under management, is forecasted to grow by 8% annually by 2026, according to HSBC.