India is one of the best performing emerging stock markets in 2014, up 36% year-to-date, according to data from S&P Dow Jones Indices.
Gains are being driven by the impact of economic reforms pursued by India’s recently elected prime minister Nahendra Modi, initiatives which have seen GDP growth estimates marked up to 6% in 2015/16.
Julia Dickson, a portfolio manager at emerging markets specialist fund manager Ashmore (ASHM), says the benefits are now showing through in corporate earnings.
‘We have already started observing an increase in profit growth and forward earnings expectations,’ says Dickson’s market commentary, ‘India – Good Karma for equities.’
‘We expect revenues to grow 10-12% per annum with earnings growth at 25-30% per annum over the next few years. Earnings are likely to surprise on the upside as the market will be somewhat impatient at a slower pace of reform in the immediate term.’
Investors can get access to Indian equity exposure through a range of funds, including Ashmore’s, or ETFs including db x-trackers MSCI India Index (XCX5).
Key risks include India’s reliance on exports to the United States and the European Union, a reversal in the recent slide in oil prices and a worse-than-expected monsoon season, Dickson adds.
The only emerging market to have performed better than India year-to-date is Qatar, at 37%, covered in Shares (16 Oct).