In a market environment that remains characterised by uncertainty, one country stands out in particular: India. While many emerging markets are sending mixed signals, India's stock markets are reaching new records – despite geopolitical tensions with neighbouring Pakistan. The Nifty 50 and BSE Sensex are trading at all-time highs, even though the situation in the border region of Kashmir is tense once again. At first glance, this seems contradictory, but a closer look reveals a different picture: The market has clearly learned to deal with this geopolitical unrest. The uncertainties are factored in, and the economic outlook outweighs them.
Country developing into a manufacturing and export nation
Away from the headlines, India is undergoing a profound transformation. Infrastructure expansion, digitalisation and growing consumer spending are forming the backbone of a long-term growth cycle. For example, the underground network has grown fourfold to over 1,000 kilometres. And the Indian rail network is growing by around 15 kilometres every day. To put these figures into context, because they are somewhat abstract at the current pace: India is expanding the entire length of the German rail network in around six to eight years, and that of Switzerland in one year. Of course, India is a huge country, but the growth is still impressive.
Another example is mobile phone production. A decade ago, India imported hundreds of millions of mobile phones. Today, the country meets virtually all of its domestic demand from local production and has also become an exporter of mobile phones. India is thus increasingly developing into a manufacturing and exporting nation.
Domestic consumption as a robust growth engine – fourth in the world for AI
India benefits greatly from its young population and growing middle class. Domestic consumption has established itself as a robust growth engine – an advantage that partially decouples the country from global trade risks. In a world where export dependency is often a source of uncertainty, this stable consumption offers a valuable constant.
Another aspect that is often overlooked is India's pioneering role in the implementation of new technologies. The country ranks far ahead in global comparisons, particularly in the use of artificial intelligence. 80% of companies have AI projects underway. This does not necessarily mean that they are developing their own software, but they are exploring the potential of AI and how it could improve productivity, for example. This 80% figure is a top value. The country ranks fourth in the Stanford University Institute's ranking, behind the US, China and the UK. But it is already ahead of highly developed economies such as Japan, Germany and Italy. India therefore outperforms all these countries in terms of AI implementation.
How can investors best participate in India's growth?
There are many opportunities for investors. For investors who have primarily invested in developed countries to date, an ETF focusing on India could be a strategically sound building block. Common indices almost completely exclude emerging markets. The MSCI World, for example, consists of 70% US stocks, a small portion of European stocks and Japan, and zero emerging market stocks. For many, the question is not so much about timing as it is about getting started, because there are some great growth opportunities that you simply miss out on with a broad standard index like the MSCI World.
Marcus Weyerer is director, ETF investment strategy, EMEA at Franklin Templeton. The views expressed above should not be taken as investment advice.