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; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Client Services Manager - Relationship Management - London

    £30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

    Recruitment Genius: Credit Controller / Customer Service

    £18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

    Recruitment Genius: Tax Assistant

    Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

    Recruitment Genius: Outbound Sales Executive - OTE £25,000

    £16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

    Day In a Page

    Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

    Celebrities call on David Cameron to take more Syrian refugees

    One young mother tells of torture by Assad regime
    The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

    The enemy within

    People who hear voices in their heads are being encouraged to talk back
    'In Auschwitz you got used to anything'

    'In Auschwitz you got used to anything'

    Survivors of the Nazi concentration camp remember its horror, 70 years on
    Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

    Autumn/winter menswear 2015

    The uniforms that make up modern life come to the fore
    'I'm gay, and plan to fight military homophobia'

    'I'm gay, and plan to fight military homophobia'

    Army general planning to come out
    Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

    What the six wise men told Tony Blair

    Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
    25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

    25 years of The Independent on Sunday

    The stories, the writers and the changes over the last quarter of a century
    Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

    Homeless Veterans appeal

    As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
    Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

    Smash hit go under the hammer

    It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
    Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

    The geeks who rocked the world

    A new documentary looks back at origins of the computer-games industry
    Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

    Belle & Sebastian is taking a new direction

    Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
    America: Land of the free, home of the political dynasty

    America: Land of the free, home of the political dynasty

    These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
    A graphic history of US civil rights – in comic book form

    A graphic history of US civil rights – in comic book form

    A veteran of the Fifties campaigns is inspiring a new generation of activists
    Winston Churchill: the enigma of a British hero

    Winston Churchill: the enigma of a British hero

    A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
    Growing mussels: Precious freshwater shellfish are thriving in a unique green project

    Growing mussels

    Precious freshwater shellfish are thriving in a unique green project