India could be jewel in the crown for investors

With a new government and an ambitious prime minister, the country offers the prospect of strong returns. But there may be hiccups ahead, warns Simon Read

India's new Prime Minister Narendra Modi held his first Budget last month. It followed a relatively strong run in Indian equities; in fact India has been the best-performing market globally this year.

Will that continue and should investors keep faith with funds invested in the region? Or is it time to take profits and shift savings elsewhere?

Darius McDermott at the fund supermarket Chelsea Financial Services believes there's plenty more upside.

"India is one of my favourite emerging-market investments for the long term," he said. "Its large current-account deficit made the market quite reliant on foreign capital flows and the strength of the US dollar, so the currency in particular was hit hard when tapering talks began last year. But things are now looking up."

He pointed out that the deficit is now starting to improve, having fallen from 4.9 per cent of GDP at the beginning of 2013 to around 2 per cent now, and inflation is falling.

"Most importantly, this is the first time in 30 years that India has not had a coalition government and the first time in its history that a government with a non-socialist, pro-market philosophy will be in power with a majority."

This, said Mr McDermott, means that while it will remain a volatile market in the short term – so not necessarily for the nervous – in the longer term the new Government could really make a difference.

"We need to see that reforms are headed in the right direction, even if they take time," he said. "There is real potential in the market and the economy has great demographics, with a young and very highly educated population."

Avinash Vazirani, manager of the Jupiter India fund, said last month's Budget was very positive.

"Where previously we had been used to attractive headline announcements but hidden stings in the tail, this time the small print was impressive and I take an optimistic view of what the finance minister is trying to achieve."

Mr Vazirani is positive about long-term growth.

"With valuations marginally above the 10-year average, an economy at the bottom of its current cycle and a huge number of positives set to come through as a result of the new Government and Budget, in my view there is still significant scope for further upside in equities in the medium-to-long term. This is despite the considerable market gains already seen this year."

Kunal Desai, manager of the Neptune India fund, is also extremely positive.

"As global investors continue to scour emerging markets through the lens of reform potential, India shines bright. Indeed we think it can sparkle even brighter," he predicted.

However, there have been false dawns before for the region, he acknowledged.

"But I believe this time is different for three reasons. First, the strength of the new Government is unprecedented.Next, the electorate have voted directly for economic growth and development over populism and caste.

"And finally, this presidential-style election was essentially won by one individual, Narendra Modi – a man with a track record of decisive action during his tenure as Gujarat chief minister."

Prime Minister Modi is certainly ambitious. He has a lot of aims but many may not be achieved.

His key challenges include tackling inflation and the country's finances, rebuilding local business confidence, speeding up decision making and getting infrastructure projects up and running.

Progress may take a considerable time and there are bound to be hiccups along the way, which should be a warning for nervous investors.

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

election 2015The 10 best quotes of the campaign
A caravan being used as a polling station in Ford near Salisbury, during the 2010 election
election 2015The Independent's guide to get you through polling day
David Blunkett joins the Labour candidate for Redcar Anna Turley on a campaigning visit last month
voicesWhat I learnt from my years in government, by the former Home Secretary David Blunkett
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Guru Careers: Management Accountant

    £27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

    Guru Careers: Project Manager / Business Analyst

    £40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

    Day In a Page

    General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

    'We will not sit down with Nicola Sturgeon'

    In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
    VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

    How ordinary Britons celebrated VE Day

    Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
    They came in with William Caxton's printing press, but typefaces still matter in the digital age

    Typefaces still matter in the digital age

    A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
    Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

    'Missing link' between Earth's two life-forms found

    New microbial species tells us something about our dark past, say scientists
    The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

    Pan Am Experience: A 'flight' back to the 70s

    Tim Walker checks in and checks out a four-hour journey with a difference
    Humans aren't alone in indulging in politics - it's everywhere in the animal world

    Humans aren't alone in indulging in politics

    Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
    Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

    Crisp sales are in decline

    As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
    Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

    Ronald McDonald the muse

    A new wave of artists is taking inspiration from the fast food chain
    13 best picnic blankets

    13 best picnic blankets

    Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
    Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

    Barcelona vs Bayern Munich player ratings

    Lionel Messi scores twice - but does he score highest in our ratings?
    Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

    Explosive batsman who sets the range for Kiwis' big guns

    Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'