Thursday, 17 December 2015

India, the Next Choice of Investment for 2016?

According to an article from the Wallstreet daily entitled "India's Modi Still Has to Deliver on Reform", it is expected that India to be the top investment destination for investors come 2016. Economist are forecasting a GDP growth of 7.6% for 2016 as compared to China's 6.3%. As a matter of fact, India has already surpassed China as the fastest growing nation. With all the attention now pointing at India, this article from Wallstreet has listed down the potential upsides and downsides of India for 2016.

  • Canada Pension Plan Investment Board has pledged to invest $6 billion by 2022 in the country.
  • Recent falling oil prices has push inflation down at India. 
  • In addition, the cheap oil price has also eased the balance book of the country. FYI, oil is the second largest source of energy in India.
  • 70% of the country's GDP is domestically driven.
  • India will have the second-largest base of internet users by year-end, overtaking the United States. 
  • In 2017, the country will overtake the United States as the second-largest smartphone market, again only trailing China.
Added information: The increasing base of internet users in India have not gone unoticed. Google's India born CEO, Sunder Pichai recently announced that Google will invest more in India

Potential Pitfalls
  • Opposition politicians work to slow the prime minister's reform agenda
  • Government employees and retired civil servants set to see a 23% rise in salaries and pensions, starting in January. To meet those demands, Modi will have to either raise taxes or cut back on infrastructure spending. 
  • Total capital expenditures by Indian companies this year nosedived. Indian companies are waiting for demand to pick up before investing. Part of the reason behind the lack of spending may still be strangling regulations in India.
  • Bad loans in the Indian banking system are likely higher than reported. Credit Suisse says 17% of bank loans are stressed compared with the central bank’s estimate of 11%.
A self sustaining economy, healthy GDP growth as well as potential foreign investments does make India a better bet as compared to other emerging countries. 

The India Stock Exchange (NIFTY) has not performed well this year. A bright start at the early of the year will most probably end with negative YTD by the end of 2015. 

However with a slowing China market coupled with financial challenges faced by Developed countries (US, Japan and Europ), foreign funds might just turn to India equities as their next best bet. Hopefully we might witness a bullish Nifty in 2016?

Can Malaysians invest into India?
Yes it is possible for Malaysian to invest into India equities. The easiest option is for you to invest via unit trust. Currently there is only one unit trust fund (a feeder fund) which solely invest into India equties. The fund is from Manulife and goes by the name Manulife India Equity Fund

Go check it out.

Cheers and happy investing!

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