For those looking to the emerging markets for outsize good returns over the long term, look no further than India. The unprecedented result of the state election in Uttar Pradesh is both a ringing endorsement of the government’s policies but also sets the BJP party of Narendra Modi on a path to gaining the size of majority in the upper house to accelerate its reform programme.
India unlike anywhere else in the world today has a combination of strong underlying demographic and reform positives allied with such credible political leadership.
Such positives often come with significant premiums on market valuations. However we believe that Indian asset markets are undervalued relative to the economic opportunity at hand. In bond markets yields are still relatively high, a reflection of the very prudent and sensible policies of the central bank. The equity market still has to benefit from a steady stream of positive news on corporate which should surely flow with GDP growth at 7%.
We believe investing in Indian asset markets today will prove a rewarding investment over the next five years. Foreign investors have to date been transitory investors. As more international commits to the asset markets annual returns of 10-15% per annum in equities are quite possible. An opportunity too good to miss.