India has an edge over other countries among the emerging markets, said MD and Chief Investment Strategist, Prudential International Investment Advisers USA, John Praveen. He was speaking at the fifth Cafemutual Confluence 2016 held today in Mumbai.
The primary reasons behind India’s popularity among global investors are its growth potential and attractive demographic. India has one of the fastest growing GDPs in the world. This is coupled with healthy macroeconomic indicators like favorable inflation and improving corporate profitability.
In addition, India’s attractive demographics with a large young working population means that the country will get richer before it gets old, which provides global investors a comfort to invest with a long term perspective.
Also, Indian markets have a healthy sectoral mix compared to other markets. Typically, emerging markets are dominated by sectors like energy and finance. However, Indian markets provide a good mix of sectors which helps in diversifying portfolio and reducing risk.
Finally, on the policy side, India has a stable government and GST is around the corner. All these factors are positive for India.
Among Asian economies, India stands out as most attractive. Though global investors are generally still skeptical about Asia, India remains a consensus overweight.
When asked about what are the key risks for Indian market, Praveen said that expectations of people are very high and any disappointment could derail the rally. In addition, the valuations of small and mid-caps are high at the moment. But both these are short term in nature. In the long run, India is headed for a sustained bull run, he said.
On emerging trends, the correlation between equity and bonds has increased positively. Going forward, traditional asset allocation strategy which includes only equity and debt may not work. So he suggested investors to look at multi asset funds which invest in real estate, gold, commodity apart from equity and bonds.
