India has a number of financial tailwinds that make it a extremely engaging funding vacation spot and an acceptable development market various to China, in keeping with the CIO of an Indian life insurance coverage firm.

“The investment landscape in India is positive as the country is seeing the best structural growth opportunity with prudently managed fiscal and monetary policies coupled with strong on-going domestic capex, and benefits from China+1 [not investing only in China and diversifying into other markets] further supporting manufacturing growth,” Poonam Tandon, CIO of IndiaFirst Life Insurance, instructed AsianInvestor.

IndiaFirst Life Insurance Company, headquartered in Mumbai, is a three way partnership between two giant state-owned banks, Bank of Baroda and Union Bank of India, in addition to Carmel Point Investments India, managed by non-public fairness funds run by Warburg Pincus.

It had property underneath administration of about $2.7 billion on the finish of March 2023.

Tandon’s view is shared by different entities: India provides the most effective structural development story within the area but continues to be ignored by some international buyers, analysis issued in early March from UBS Global Wealth Management famous.

“We expect real annual GDP growth in excess of 6% over the next five years, and corporate profit growth in the low-to-mid teens, likely supported by policy continuity after this year’s elections,” it mentioned.

IMPROVING CONSUMPTION, BALANCE SHEETS

Other beneficial components embody sustained company earnings development, a re-leveraging of company India’s steadiness sheet and rise in consumption, mentioned Tandon.

Indian firms have successfully managed their steadiness sheets over the previous 10 years, and the debt-equity ratio of Indian corporates is at an all-time low of round 0.5 instances, a March 5 observe from Invesco mentioned.

Earnings for firms are rising strongly with earnings per share rising by 22% on common over the previous 5 years, it mentioned, including that earnings are at present experiencing a ‘important cyclical uptrend.’

The Nifty 50, a widely-tracked fairness index, additionally gained 20% in 2023 and Tandon is optimistic about beneficial risk-adjusted returns in 2024.

“…a re-election of the current government will likely continue the political and economic momentum,” Tandon added.

India’s basic election throughout April-May factors towards continuity, in keeping with UBS, which mentioned it appears believable that Prime Minister Narendra Modi’s BJP social gathering might even safe a majority by itself and scale back reliance on coalition companions.

Domestic funding flows are additionally anticipated to be sturdy as long-term financial savings platforms such because the National Pension System and Employees’ Provident Fund Organisation contemplate greater fairness allocations, in flip, decreasing dependence on international funding flows.

“The combination of above factors we feel India is one of the best investment markets in the world and also a good alternative growth market to China where growth is expected to slow down,” Tandon mentioned.

BONDS BOOST

Indian bond markets have additionally turned interesting to worldwide buyers.

India might be included within the JP Morgan Government Bond Index – rising markets indices, which is anticipated to set off as much as $30 billion in worldwide inflows.

Starting in June, Indian bonds might be added by one proportion each month to the index till the utmost weight of 10% is achieved by April 2025.

That will set off sizeable passive index bond flows and is a big technical tailwind for the Indian authorities bond market, one of many largest and most liquid in Asia, in keeping with institutional buyers.

“We believe investors are already pre-positioning themselves before inclusion, so we don’t think there will be any significant impact on the yields as they have already softened factoring this event,” Tandon mentioned.

“Having said that, with the inclusion, investors’ base will widen, and the bonds will likely become more liquid with lower risk perception and greater transparency in the other markets of the world,” she added.

India bonds noticed their tenth and largest month-to-month influx in January at $2.5 billion, in keeping with Bank of America Securities analysis.

The JP Morgan bond indices inclusion may even “open the possibility of inclusion in other major global indices, which is positive in the long run,” mentioned Tandon.

Indian bonds are a candidate for inclusion into the markedly bigger Bloomberg Global Aggregate Index as nicely.