WM Market Reports

Spotlight On India’s Investment Opportunities – DWS

Amanda Cheesley Deputy Editor 26 April 2024

Spotlight On India’s Investment Opportunities – DWS

With India’s economy seeing rapid growth and as Indian prime minister Narendra Modi is a firm favourite to win the 2024 elections, senior figures at Nippon Life India Asset Management and German asset manager DWS delve into investment opportunities in the country.

At a media event this month, Sulabh Jhajharia, portfolio manager at Nippon life India Asset Management, highlighted that India is expected to become the third largest economy, characterised by a vibrant tech landscape, significant infrastructure investment and a political climate primed for economic advancement.

Over the past decade, India’s government has enacted reforms which include rooting out excessive use of cash, digitalising the country, improving tax collection and investing in infrastructure. 

“Initiatives led by the government and regulators for Digital India, aided by the growing internet and smart phone penetration, have led to the faster adoption of digital technologies,” Jhajharia said. “Digital payment transactions, as a percentage of GDP is one of the highest in the world. The digital infrastructure also enables financial services to be easily disseminated,” he added.

India infrastructure upgrades
Jhajharia emphasised the structural reforms introduced by Narendra Modi’s ruling Hindu nationalist BJP government and the significant infrastructure investment, saying that Indian railways have the fourth largest system in the world, operating 13,523 passenger trains and 9,146 freight trains daily.

“Robust growth over the last decade attributed to government initiatives such as Regional Connectivity Scheme UDAN (launched in 2016), under which 469 routes connecting 74 airports have also been made operational,” he continued. In the 2023/24 budget, plans for an additional 50 airports, heliports, water aerodromes and advanced landing grounds were also announced.

Jhajharia also noted that the government is focusing on renewable energy, with a target of 500 GW by 2030, attracting investment in solar, green energy. The budgetary allocation for housing and urban development was also increased to $9 billion in the 2023/24 budget from $3 billion in 2015, he said.

Elke Schoeppl-Jost, regional investment head APAC at DWS, also emphasised that India’s productivity has improved as a result of supply side reforms and digitalisation. The country has become more competitive, with goods export market shares set to double to 4.5 per cent by 2031, he said. India is also gaining global market shares in high-skill service exports, such as IT services, mobile handsets, drugs and pharmaceuticals. India’s green transition ambitions are also spurring investment in new sectors, notably green hydrogen, electric vehicles and solar panels, he added.

India’s working population is also set to rise for many years, providing competitive labour costs in the manufacturing sector. Jhajharia believes that the country has a big consumption catch-up potential, powered by a fast growing young population and a rapidly-expanding middle class. The country's export infrastructure has greatly improved, with more efficient ports, road and electricity supply, he said.

European investment portfolio
Olivier Souliac, head of indexing Xtrackers products at DWS, went on to discuss the compelling investment opportunities in India in a European investment portfolio. He said it was an easier market to access for Indians and foreigners – it is consequently impacting UCITS funds, with a rising allocation of Indian sovereign bonds in global indices, making India a popular investment amongst European investors.

Souliac believes that Foreign Portfolio Investment (FPI) still has room to grow, especially in fixed income. “The Indian bond market was more difficult to access, but that is changing now,” he said. In 2023, JPM announced India’s inclusion in its Global EM Bond Index and in March 2024, Bloomberg announced India’s inclusion into Emerging Market Local Currency Government. There has been a lot of interest in Indian bonds and exchange-traded funds (ETFs), and he expects that to increase.

Souliac also mentioned that India can be a “driver of returns” as well as a “driver of diversification” – something to be considered for equity and bond allocations.

Souliac is not alone in his views. Shishir Baijal, chairman and managing director of Knight Frank India, believes that India is increasingly recognised as an attractive investment destination for global and domestic investors owing to its robust domestic consumption, long-term economic stability, and extensive infrastructural development.

See more commentary here and here about India’s economy and the elections, which started on 19 April and continue until 1 June 2024. 

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