Could India be the next investment frontier?

For a number of reasons, India stands as an enticing investment prospect in the decade ahead, including its rapid economic growth, favourable demographics, and growing middle class.

The Indian economy is expected to grow at an average rate of 7.4% in the next five years according to the IMF, making it one of the fastest growing economies in the world. This growth is being driven by a number of factors, including a young and growing population, increasing urbanisation, and rising disposable incomes.

India's population is expected to reach 1.4 billion by 2025, making it the second most populous country in the world. Over 50% of the Indian population is under the age of 25, which provides a significant workforce advantage. India is also urbanising rapidly, with over 50% of the population expected to live in urban areas by 2030. This urbanisation is creating new demand for goods and services, which is driving economic growth.

So, what makes India a compelling investment proposition for the long run?

India's middle class is also growing rapidly, with the number of middle-class households expected to reach 547 million by 2025. This growing middle class is creating new demand for consumer goods and services, and is driving economic growth.

• Rapid economic growth: India is one of the fastest growing economies in the world, with the IMF forecasting GDP growth of 7.4% in 2023-24. This growth is being driven by a number of factors, including a young and growing population, increasing urbanisation, and rising disposable incomes.
• Favourable demographics: India has a young and growing population, with over 50% of the population under the age of 25. This large and young workforce is a major asset for the Indian economy and provides significant investment potential.
• Growing middle class: India's middle class is growing rapidly, with the number of middle-class households expected to reach 547 million by 2025. This growing middle class is creating new demand for goods and services, which is driving economic growth and creating investment opportunities.
• Government reforms: The Indian government has been implementing a number of reforms in recent years to improve the business environment and attract foreign investment. These reforms have made India a more attractive destination for investors.
• Strong corporate sector: India has a strong and diversified corporate sector, with a number of leading companies in a variety of industries. These companies are well-positioned to benefit from India's economic growth and create investment opportunities for shareholders.

With these in mind, investors looking to invest in India can explore various equity industry themes that align with the country's economic growth and development – and one great way is through ADRs (American Depository Receipt) and GDRs (Global Depository Receipt) stocks – both of which are available on our CMC Invest platform.

What are ADRs/GDRs and how can I use these instruments to invest in India companies?

Indian ADR (American Depository Receipt) and GDR (Global Depository Receipt) stocks are financial instruments that represent ownership in Indian companies' shares, enabling investors to trade them on U.S. and global stock exchanges. ADRs are issued and traded in the U.S., denominated in U.S. dollars, while GDRs are issued and traded outside the U.S., typically in other major currencies. They offer a convenient means for investors to access and invest in Indian companies listed on Indian stock exchanges without the complexities of trading directly on foreign markets, allowing for portfolio diversification and exposure to India's dynamic and growing economy. Now, let us look at some of the up and coming sector themes that global investors are paying attention to.

Sector themes to consider:

Banking:

India's banking sector benefits from the country's strong economic growth and rising income levels. As the economy expands, more individuals and businesses require banking services, leading to increased deposits, loans, and fee-based income for banks.

Key Stocks: ICICI Bank Limited (IBN), HDFC Bank Limited (HDB), Axis Bank Ltd GDR (AXB)

Information Technology (IT) and Software Services:

India's IT sector has a long history of growth and innovation, with a strong talent pool and global demand for IT services. The adoption of digital technologies, cloud computing, and remote work further accelerate the industry's potential. Companies in this sector are well-positioned to benefit from outsourcing, digital transformation, and cybersecurity demands worldwide.

Key Stocks: Infosys Limited (INFY), Wipro Limited (WIT).

Pharmaceuticals and Healthcare:

India is a significant player in the global pharmaceutical industry. The sector benefits from increasing healthcare needs, the growth of generic medicines, and expanding export opportunities. The COVID-19 pandemic has highlighted the importance of pharmaceutical research and production.

Key Stocks: Dr. Reddy's Laboratories Limited (RDY)

Renewable Energy and Clean Technology:

India's commitment to renewable energy and sustainability presents opportunities in the renewable energy sector, including solar and wind power. Government incentives and environmental concerns are driving growth. Additionally, electric vehicles and clean technology solutions are gaining momentum in the country.

Key Stocks: Tata Power Company Limited (TPCL)

List of investable Indian ADRs/GDRs on CMC Invest

ADRs:

INFY: Infosys Limited - A leading Indian IT services company, listed on the NYSE.

IBN: ICICI Bank Limited - A prominent Indian private sector bank, also listed on the NYSE.

HDB: HDFC Bank Limited - One of India's largest private sector banks, listed on the NYSE.

WIT: Wipro Limited - A multinational IT services company based in India, listed on the NYSE.

MMYT: MakeMyTrip Limited - An Indian online travel company, listed on the NASDAQ.

LYT: Lytus Technologies Holdings PTV Ltd - Lytus Technologies Holdings Pvt Ltd is a platform services company primarily providing content streaming/telecasting services to users located all across India.

WNS: WNS (Holdings) Limited - A global business process management company with Indian roots, listed on the NYSE.

RDY: Dr. Reddy's Laboratories Ltd - An Indian pharmaceutical company, listed on the NYSE.

SIFY: Sify Technologies Limited - An Indian information and communications technology company, listed on the NASDAQ.

YTRA: Yatra Online, Inc. - An Indian online travel agency, listed on the NASDAQ.

AZREF: Azure Power Global Limited - A solar power company with Indian operations, listed on the OTC Markets.

Source: CMC Invest, 31 Oct 2023

GDRs:

AXB: Axis Bank Ltd GDR - Represents shares of Axis Bank, one of India's major private sector banks, listed on the London Stock Exchange (LSE).

TPCL: Tata Power Company Limited - Tata Power Co., Ltd. engages in the provision of power supply and transmission charges and headquartered in Mumbai, India

GAID: GAIL (India) Ltd GDR - Represents shares of GAIL (India) Limited, a prominent Indian natural gas company, listed on the London Stock Exchange (LSE).

LTOD: Larsen & Toubro Ltd GDR - Represents shares of Larsen & Toubro, a diversified Indian engineering and construction company, listed on the London Stock Exchange (LSE).

MHID: Mahindra & Mahindra Ltd GDR - Represents shares of Mahindra & Mahindra, a leading Indian multinational automobile manufacturer, listed on the Luxembourg Stock Exchange.

RIFS: Reliance Industries Ltd GDR - Represents shares of Reliance Industries, a major Indian conglomerate with interests in petrochemicals, telecommunications, and retail, listed on the Frankfurt Stock Exchange.

RIGD: Reliance Industries Ltd GDR - Represents shares of Reliance Industries, listed on the Luxembourg Stock Exchange.

SBIA: State Bank of India GDR - Represents shares of the State Bank of India, India's largest public sector bank, listed on the London Stock Exchange (LSE).

SBID: State Bank of India GDR - Represents shares of the State Bank of India, listed on the Luxembourg Stock Exchange.

Not a fan of single stocks but still would like to invest in the India story? Investing in India-themed ETFs can be an option too. We have consolidated a list of ETFs available on our CMC Invest platform that you can consider:

List of investable ETFs on CMC Invest:

DGIN: WisdomTree India Earnings Fund - Focuses on Indian companies with profitable earnings, providing exposure to firms with strong financial performance.

EPI: WisdomTree India Earnings Fund - Seeks to track the performance of Indian companies with strong earnings, offering a fundamental-weighted approach to the Indian equity market.

FLIN: Franklin India ETF - Provides exposure to Indian equities, allowing investors to participate in India's economic growth and market opportunities.

GLIN: VanEck Vectors India Growth Leaders ETF - Offers access to high-growth Indian companies by tracking the MarketGrader India All-Cap Growth Leaders Index.

INCO: Columbia India Consumer ETF - Focuses on Indian consumer-oriented companies, capitalizing on the growing middle-class consumer market in India.

INDA: iShares MSCI India ETF - Tracks the MSCI India Index, offering broad exposure to Indian equities and the country's economic development.

INDF: iShares Edge MSCI Multifactor Industrials ETF - Focuses on Indian industrial companies using a multifactor investment approach.

INDL: Direxion Daily MSCI India Bull 2x Shares ETF - A leveraged ETF aiming to provide 2x daily exposure to the MSCI India Index.

INDY: iShares India 50 ETF - Offers exposure to 50 of the largest Indian equities, focusing on large-cap companies.

INQQ: iShares MSCI India Small-Cap ETF - Concentrates on Indian small-cap stocks, allowing investors to participate in the growth potential of smaller companies.

NFTY: First Trust India Nifty 50 Equal Weight ETF - Provides equal-weighted exposure to 50 large-cap Indian equities, offering a different risk-return profile compared to traditional market-cap-weighted indices.

PIN: Invesco India ETF - Seeks to replicate the performance of the Nifty 50 Index, offering broad exposure to Indian equities.

SMIN: iShares MSCI India Small-Cap ETF - Focuses on Indian small-cap stocks, aiming to capture the growth potential of smaller companies in the Indian market.

Source: CMC Invest, 31 Oct 2023

In conclusion, investors should consider allocating a portion of their stock portfolio to Indian ADR/GDRs and ETFs for several compelling reasons. ADRs/GDRs offer direct exposure to specific Indian companies, enabling investors to tap into India's growth story and leverage their insights into individual firms or sectors. On the other hand, ETFs provide diversified exposure across a broader range of Indian stocks, reducing company-specific risk and streamlining investment management. Both options grant access to India's rapidly expanding economy and diverse sectors, allowing for portfolio diversification, potential capital appreciation, and participation in one of the world's most promising and dynamic markets, while accommodating different risk preferences and investment strategies.

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