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Three great ways to invest in the emerging power of India

In the third of our series on emerging markets we look at three investments to help you buy into the India growth story.

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by Drazen Jorgic on Jul 21, 2010 at 09:35

Three great ways to invest in the emerging power of India

In the third of our series on emerging markets we look at three good ways to tap into the India growth story.

India has one of the biggest - and youngest - populations on the planet. With 600 million people under the age of 26, the possibilities for the economy are endless.

As power inevitably shifts from the West to the East, China has tended to grab all the headlines and column inches when it comes to Asia’s projected rise to dominance.

But in truth, the country that many economists and fund managers are tipping to be an even better investment is India, Asia’s second largest economy. India has one of the biggest - and youngest - populations on the planet. With 600 million people under the age of 26, the possibilities for the economy are endless.

Harnessing the growth

With a population of 1.2 billion, India is the world’s largest democracy and its economy is powering ahead at a record pace. But what makes the country particularly appealing to investors is its demographics, with half of the population under 26 years of age.

Last week the government revealed growth is above expectations and is likely to hit 9% at the start of 2011. However, with inflation spiking to around 10%, many investors are worried the Indian central bank may hike interest rates for a second time this year and put growth at risk. The authorities, though, are confident inflation will fall to around 5% at the start of next year.

The Indian government, meanwhile, has suggested it is looking to double the infrastructure spending over the next five years, with $1 trillion (£645 billion) of public and private money needed to improve the roads, railways and ports.

** What £1000 invested in June 2000 would be worth today **

Once in a generation opportunity

Robin Griffiths, Cazenove Capital’s highly respected chief strategist who predicted the start of the last bear market, believes India represents one of the best investment opportunities for a generation, especially for long-term investors looking to build a sizeable pension pot.

‘India is my favourite long-term market. It is people who drive the stock market and the economy so we are buying a healthy situation where the people and work ethic is in place. China, being an export machine, must still be linked to the West, so if the West has a soft patch it is logical that it will impact China.

‘That is considerably less the case with India, which doesn’t really import or export anything very much. It’s just got to build its own economy by building its infrastructure which I think will keep driving the secular – or the long-term trend – higher. This is one of the safer of the Asian markets to be a long-term investor in.’

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14 comments so far. Why not have your say?

I have both First State Indian Subcontinent & Jupiter India in my SIPP. Since i purchased First State it has risen 104%...!!

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The one thing that will hold India back vis a vis China is that India is a democracy. Democracy leads to socialism. Socialism leads to decline.

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India is a conundrum. On the one hand you have extreme wealth and on the other extreme poverty. It is true that there is a large pool of under 26s with sizeable purchasing power. The main driving force in India has been education, education, education. It was John kenneth Galbraith the famous economist who perhaps coined that phrase and India has invested heavily in education and now the country and the educated masses are benefiting.

There are two fundemental problems with the Indian economy, the first one is lack of proper infrastructure and the second one is hyper inflation and both need to be addressed. Whereas the second one can be dealt with in the short term, the the problem re infrasturcture is going to take time.

India may not be able to match China but that is the price of democracy. So do you want growth or growth and democracy. I will go for the second one. we are after all the world's largest democracy and a true one.

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Very fundamental, India is a democracy, large young population, this is all positive for growth. I invest via J P Morgan Indian IT, I am not sure if this is the best way to invest i n India.

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Nothing wrong with the Fidelity Funds India Focus fund either, which seems to have a higher Beta than First State (which I also own) and has made me some handsome money so far:-) JF Funds, which are domiciled in Hong Kong, also have a very potent India fund, administered by JPMorgan out of Luxembourg as of recently.

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@ Drazen Jorgic

This article goes awry around para 2 with the mantra that "power inevitably shifts from West to East". It may or it may not.

China has unresolved issues, as an autocracy attempting to harness a market economy. India and its neighbour Pakistan are nuclear powers locked in confrontation. The West has massive immigration (and therefore cheaper labour) and considerable lead in technologies that dominate the high ground of aerospace and R&D.

Historically, every emerging power had a short period when it made vast economic gain using cheap labour, and a further period when its writ ran wide by investing its capital gain. Beyond that, events are unpredictable.

For India (and China), signs are already emerging that workforces want greater reward for their labour; while, in the West, there is recognition of a need to return to the manufacture of high quality and innovative goods (and demand for them) and to restore priorities in education for mathematics, science and engineering.

A safer assumption would be to accept that nations of the East will take their place as economic partners of the of the West, providing that they manage to remain out of conflict and do not mismanage their affairs (remember that India wasted 50 years after independence on its socialist vision, China nearly self destructed with the Cultural Revolution and even Japan is still recovering from "the lost decade").

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how do i purchases unit in first state indian subcont

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I have held Jupiter India with Avinash since it was launched and increased my investment during the recession....I have to say I am very pleased with it so far.....

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Over the last ten years India has been one of my best investments, through JP Morgans India investment trust, First State and now Neptunes India Fund. And through this prolonged turbulent market its been the India Funds which have held up the best in my portfolio. I knew it would be a good market but has turned out better than i expected.

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Yes, India has been a success story but watch out! Don't fantasize too much! India's rising young population also means enormous strain on resources and resources (food, water, electricity etc) are not growing at the same rate as population. That means unrest. A big chunk of this young population is still unemployed. Quite a few of them are being drawn to crime and terrorism. India also has a serious Maoist insurgency to deal with. Now over 30% of India's area is effectively under Maoist control where no civil or police official dares go. India's large tribal population has been not only neglected but systematically exploited from before independence. That together with unemployed youth have provided a fertile ground for the Maoists to recruit their cadres from. Then India has to deal with cross border terrorism, which will only grow in future as the Afghan policy of the U.S. and NATO fails. This will bleed the country even more as it lacks a will to address the problem decisively. India's agriculture is heavily dependent on Monsoon and agriculture is still a big chunk of the economy. One failure of Monsoon could send Indian economy spinning down. Last but not the least, India's democracy is also its weakness. This may sound weird but it is true. With no conscientious on important national issues such as economy, foreign policy and internal security amongst various political parties, India is a like a static body, being acted upon by forces from various opposing directions! So, all in all India has far bigger and serious challenges than opportunities.

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RaviP37. Some great points.

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Cassim aboo

to purchase indian funds visit Hargreaves Lansdown website. H L offers indian funds from Jupiter,Fidellity, Neptune,Henderson,Invesco,JP Morgan and more - have over 2000 funds from all leading Fund Managersalso will not charge for initial commission.

good luck

kanti shah

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reply to cassim aboo

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P LM

Jul 27, 2010 at 12:42

Minimise capital investment risk with a broadly based Global Emerging mkt. fund combined monthly contributions, spread over 10 years min. This is the way to avoid big loses in such very risky markets

What goes up, also comes back down to earth. Peakes & trougths are for those who dont know, that they dont know.

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