Goldman Sachs’ revelations that the number of affluent citizens in India will rise from 60 to 100 million by 2027, and that the country’s inflation-adjusted GDP growth should average 6.0 per cent from now to 2028, highlight the growing optimism regarding investment in India.
Defining the affluent of India is not entirely straightforward according to Goldman Sachs analyst Arnab Mitra. There is no set definition of wealthy in India so Mr. Mitra looks at those who take flights annually, use food delivery services and credit cards and those filing income taxes on more than one million rupees (US$12,040) per year.
The Indian equity benchmark, the S&P BSE Sensex, appreciated 22.0 per cent in Canadian dollar terms over the past twelve months. This easily outdistanced the S&P/TSX Composite’s 8.4 per cent. Over three years, the Sensex’s average annual Canadian dollar return of 11.6 per cent beat out the TSX’s 8.0 per cent.
Mr. Mitra notes that Indian stocks benefiting from broad wealth creation, those involved with SUV sales, premium liquors, healthcare and luxury wristwatches for instance, have outperformed the broader market. Automaker Mahindra& Mahindra, producers of the top selling SUV, has seen their shares more than double in the past three years in Canadian dollar terms.
Citi India equity strategist Surendra Goyal has just completed a marketing tour of North American institutional portfolio managers. He reports that interest in Indian assets remains high, even after the average India weighting in global ex-U.S. funds climbed from roughly 2.0 per cent in 2019 to about 5.0 per cent currently.
Mr. Goyal believes that infrastructure-related investment, both public and private, will join affluent Indians in pushing the Sensex higher, although high valuations may moderate gains in the near term.
The major ETFs tracking Indian equities available in Canada are the iShares India Index ETF (XID-T) and the BMO India Equity Index ETF (ZID-T).
-- Scott Barlow, Globe and Mail market strategist
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