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This is a chapter from the Emerging markets: An evolving landscape paper. To read all chapters in this paper, click here.

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India has the potential to drive emerging market (EM) returns over the next decade

  • The world’s fastest growing major economy, India remains a multi-decade structural opportunity.1
  • It offers high returns, consistent earnings growth and strong governance.2
  • India is now the second largest country in the MSCI Emerging Markets, its highest weighting in the index.3

India’s role in EM has significantly increased in recent years and its programme of structural reform is now enabling it to reach its potential. It has more than doubled its weight in the EM Index in just six years—from 8% to 20%4. Strong economic growth delivered in a period where global growth has been challenging has enabled the country to attract investors and power its market cap ascendancy. With tremendous growth in Gross Domestic Product (GDP) per capita as well – India has been able to deliver in-tandem stock market returns. market returns.

But what does all this mean for equity markets? India is early in its journey of significant reforms which have created a structural growth opportunity for investors. The country has already demonstrated the positive impact of this through its increased relevance in the EM asset class. Although the structural reforms have been supportive, it is the companies themselves which have delivered on earnings and are expected to continue delivering in the years to come. We believe that India has the potential to drive returns in EM over the next decade as the structural growth opportunities come to fruition and companies rise to the challenges presented to them.

Endnote

  1. Source: Factset as at 2 August 2024..
  2. Source: BBC News as at 1 March 2024.
  3. Source: MSCI as at 29 March 2024.

 

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Equity securities are subject to price fluctuation and possible loss of principal.

International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors.

The government’s participation in the economy is still high and, therefore, investments in China will be subject to larger regulatory risk levels compared to many other countries.

There are special risks associated with investments in China, Hong Kong and Taiwan, including less liquidity, expropriation, confiscatory taxation, international trade tensions, nationalization, and exchange control regulations and rapid inflation, all of which can negatively impact the fund. Investments in Taiwan could be adversely affected by its political and economic relationship with China.

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