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India election: Is now a good time to invest?

11 January 2019


Tags: Macro Economics

Narendra Modi and the BJP look set for victory in what has been a gargantuan undertaking for India and stock markets have surged to record highs on early results.


Investor optimism

In recent years India has become a firm-favourite among adventurous investors, with fast economic growth delivering stellar returns.

As a global outperformer, boasting some world-class companies and entrepreneurs, a rising middle class and growing generation of under 25s, India looks attractive and remains relatively untapped.

Proceed with care

However, investors looking to access this market should tread carefully. The Indian stock market is prone to volatility; a market rally on the back of the vote could leave it vulnerable to a sharp downturn.

The US/China trade war may also put the brakes on current levels of economic growth; that said, India is less affected than other Asian countries, partially protected by its large internal market.

Stocks or funds?

Given the volatility and risks associated with India it would be brave to pick out individual stocks and so investors could be better served diversifying through a mutual fund.

Richard Pearson, Director at Selftrade from Equiniti says, “Investors looking for exposure to India could consider the Jupiter India Fund; it’s by far the most popular choice among Selftrade investors, hardly surprising given manager Avinash Vazirani’s long-term track record of great returns. The fact that he has been at the helm since launch in 2008 gives some stability in a market that can be volatile.

“As ever, it is important to consider diversification and investors should not over commit to any one market, let alone an emerging one. Investors that are keen on India but are anxious about putting all their “Asian eggs” in one basket, may want to get exposure to India through a broader fund. J.P Morgan’s Emerging Markets and First State’s Asia Focus funds have just short of 20% exposure to India and both managers can boast a good pedigree in the region.”

Thinking long term

India is best suited to those with higher-risk profiles and long-term horizons. Investors should think twice investing money in emerging markets if they need it back in a hurry; India is no exception, with political and economic risk driving volatility.

 

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Writer: Selftrade Tags: Macro Economics

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Selftrade does not provide investment advice. This article is the authors view and is not the view or opinion of Selftrade and Selftrade accepts no liability for any loss caused as a result of the use of this information. The opinions expressed are those of the author at the time of writing and should not be interpreted as investment advice.

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