With Crude on the boil again, trade wars in full swing, the Indian Rupee at an all-time low and perceived uncertainty regarding the 2019 elections the investors have begun questioning themselves – is this the right time to invest in Indian markets?
My answer to this question is an unequivocal Yes!
Let’s begin by admitting that these are real risks. They are now a part of the daily drill, on the electronic and print media alike. These economic headlines have made it to the front page of the normal daily papers. They are, therefore, discounted. Some of these factors may get worse, but it’s not an issue in the longer run. If you wait for the current crop of problems to get over, a fresh set of problems will crop up. So you will never get a perfect time to invest. You risk missing the woods for the trees.
Just as you ponder over the current risks, the Indian economy is racing ahead , each passing minute. For the June quarter, our GDP grew at a rate of 8.2%. This is the fastest growth in the world amongst the large economies. We are the world’s 6th largest economy in nominal terms and the world’s 3rd largest in Purchasing Power Parity basis. We are a young country with an average age of around 28 years. Only 48% of our population is working, as compared to 63% of China. As more and more people work, the per capita income of the country will rise at a much faster pace.
Things NRI’s should consider while investing in India
China’s Vote of Confidence:
In May this year the Industrial and Commercial Bank of China (ICBC) the largest bank of the World by assets, launched an India dedicated fund. The fund will invest in ETFs listed on more than 20 exchanges in Europe and the U.S. that are based on the Indian market. What can be more inspiring than the fact that China is saying that India is at an inflection point because today it accounts for about 7% of the world’s GDP? This was exactly where China was a decade ago. With its expanding middle class, India will go places.
Our total mortgage outstanding as a percentage of GDP is just 8%. Only 6% of our population has a private health cover. About 4% of the population has an AC at home. Just 2% of our population owns a car and only 1.75% of the population has a life insurance policy.
Misplaced Election fear:
The fear about the elections is misplaced. If the election outcome is not according to what the markets expect, the markets will brood for some time but it will be business as usual for the markets after some time.
In 2004 for instance, the markets expected the NDA come to power but the UPA came with the help of the left, the markets tanked 17% in two days. But the indices recouped all their losses in three months and the markets were up 50% from those levels in a year’s time. So much for election uncertainty.
The demographics of India are such well-placed that no matter who comes, we will do well as an economy and as a capital market. This year the number of people who have filed Income Tax returns is up by an overwhelming 71%. The GST has been put in place and the system is now stabilizing. The sacrifices that we as a nation have made in the form of lower GDP growth in the last two years will now start paying off in terms of higher tax compliance, lower fiscal deficit and higher GDP growth over the years.
Our current GDP of around $2.5 trillion should easily double in about 6-7 years to $ 5 trillion. What this means is that as much money the nation has made in the seventy-one years since Independence will be made in the next 7 years.
It is time to put your best foot forward. Start investing right away. Doing it through a SIP will mean that you will be gradually buying stocks. And investing through an ETF will mean that you will not have this complaint that my portfolio has not appreciated, while the markets have.
And for the NRI’s starting a SIP at a time when the Rupee is down 11% for the calendar year, it is still a better opportunity!
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