India more attractive than other emerging markets: Capital Group

NEW DELHI: Capital Group, an American financial services company, has said that India appears to be more attractive than other emerging markets in the wake of the reforms initiated by the Modi government and a boost to domestic manufacturing, offering massive opportunities across sectors — from real estate to financial services and telecom.
Although it said that the stock markets — which has seen the Sensex and Nifty trade at record highs in recent weeks — appear overvalued, there is a lot going for it. “. . . we believe the fundamental outlook for India is arguably better than ever. The market has a lot going for it: It’s one of the world’s fastest-growing economies, inflation is under control, the government has been fiscally responsible, and corruption is lower than it was a decade ago. If Indian companies can deliver on earnings and cash flows, we think it’s possible the market can grow into these valuations.
The path of India’s equities has never been a straight line, but over longer periods, the stock market has delivered some of the best returns among emerging and developed markets,” the company said in a report by three analysts.
“While political instability and market volatility may increase in advance of general elections next year, we believe that India is poised for a period of secular growth, fuelled by significant expansion in direct and fixed asset investment,” Capital Group said. The report said demographics is the biggest advantage, as bulk of consumption will come from domestic market along with western companies exploring China-plus sourcing strategies.
In industries such as chemicals, there was already evidence of the diversification beyond China helping India, it said. The analysts identified energy transition initiatives by companies such as Reliance, L&T and Tata Power as potential game changers, which could help India build astrong eco-system.