Diwali celebrations mask India investment fears
Investors in the region face further volatility ahead of the 2014 election, experts warn
Fireworks marking the Hindu celebration of Diwali – the festival of lights –have become a highlight of the autumn months in parts of Britain in recent years. Festivities began last weekend when more than 35,000 people gathered in Leicester for the switching on of the city's Diwali lights.
In India the festival is a national holiday and starts with Dhanteras, the day on which most Indian business communities begin their financial year.
But for those who invest in India, there's been little to celebrate in recent times. "India suffered during the emerging markets rout in the summer as concern about slowing growth and its twin deficits resurfaced," pointed out Avinash Vazirani, manager of the Jupiter India fund.
"However, a more sanguine view of its prospects has begun to take hold since Raghuram Rajan's arrival as the new governor of the central bank. He has shown himself to be a determined reformer, willing to press forward with unpopular decisions."
Chief among these was Mr Rajan's decision to raise interest rates. The move took everyone by surprise and dismayed business groups. But he also lowered the cost of funds for banks, and eased other restrictions imposed in July designed to support the currency.
"Economists and the government seem to be becoming more positive about India's ability to manage its current account deficit. Meanwhile, the good monsoon season, considered to be the best since 1994, should help reduce food inflation and have an impact on GDP growth in the agricultural sector," said Mr Vazirani, who said there are good opportunities to acquire strong companies at reasonable valuations.
Angus Tulloch of First State took a recent trip to India. "That reaffirmed that quality companies can flourish in spite of a poor political and economic backdrop," he said.
"In addition to visionary owners, who appreciate the benefits of looking after minority shareholders well, Indian family businesses seem to have an unusually positive approach to real partnerships."
The trip encouraged him to add stakes in trusted family businesses with strong franchises such Godrej Consumer and Titan Industries. "The economic and political weaknesses of India are a concern but are manageable over the longer term," he said.
But Rajendra Nair, fund manager of JPMorgan India, warned India is vulnerable to external factors. "Its current account deficit has led to significant currency volatility, especially in the current risk-off environment where we are also seeing capital outflows," he said.
However, he said valuations of the Indian stock market are at near-historical lows. "We believe that investment into the Indian market offers upside both in terms of currency and market appreciation," he said.
Juliet Schooling Latter, research director at Chelsea Financial Services, said: "I still think Indian equities are a good long-term investment but they are likely to remain volatile, particularly in the shorter term.
"The country has a number of structural issues and a deficit that needs need to be addressed, but with next year's election looming, minds are focused more on getting re-elected than sorting things out.
"It's really an area for higher-risk investors though who can afford to 'invest and forget' for a while – either that or do monthly investments so they can stomach the volatility."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Five Questions: Changes to car tax discs
Bargain Hunter: There's one day left to book a bargain flight with Air Asia
Two million first-time buyers are locked out
How to save money: UK is crashing down the European league table for putting money away
Mark Dampier: When even safety first is a risk, go for income and capital growth
- 1 Keira Knightley topless: Usually conservative actress does own take on #Freethenipple campaign for Interview Magazine
- 2 Oil tanker with $100 million cargo goes missing off Texas coast
- 3 George Galloway left with severe bruising after attack in Notting Hill by man 'shouting about the Holocaust'
- 4 Lady al-Qa’ida: On the trail of Dr Aafia Siddiqui, the world’s most wanted prisoner
- 5 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
What do immigrants really think of Britain? Polish immigrant's Reddit post goes viral
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
With Douglas Carswell joining Ukip, my party has taken another giant step forward
- < Previous
- Next >
iJobs Money & Business
Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...
£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...
£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...
£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony