A few months ago the news from all over the subcontinent seemed appalling. Daily bulletins were jammed with stories of uncontrolled Covid infections, oxygen shortages, and overflowing hospitals. But after a nasty spike in early May, cases have fallen fast and the vaccination programme has stepped up apace.
The stock market is reflecting this new optimism. The Sensex index of top Indian shares has more than doubled since last year’s March lows, and is up 22 percent this year, hitting over 60,000 for the first time last week. This is not just some post-pandemic euphoria, but because all the long-term structural reasons to be cheerful look to be in place. India has a fast-growing and increasingly affluent middle-class (reckoned 50m today and headed for well over 400m), a young and educated population, and wages are low relative to many other emerging economies.
India also has a government which is generally reform-minded and the country regularly ranks among the top 10 improvers in the World Bank’s Ease of Doing Business Rankings. In the shorter term, there is growing evidence of a new residential property cycle underway after a seven-year downturn and affordability remains at attractive levels for investment.
There are another couple of optimistic factors in the mix. The first is the subcontinent’s technological revolution. India’s young are open-minded and early adopters, and the rollout of the world’s largest 4G network combined with lockdowns, low-cost data and widespread smartphone usage (already 1.1 bn users) has massively accelerated the advent of commerce and digital banking. In India, 99 percent of all online activity happens on phones. This transformation may not yet be reflected in the stock market: perhaps surprisingly digital and technology currently make up only 1 percent of market capitalisation as against 30 percent in the US. But the informed word is that this about to change.
The second factor is the growing realisation that India is not China. Or, to put it the other way, China is not the only game in town. The past few years have alerted multinationals to their over-dependence on Chinese manufacturing in a time of growing political tensions with the Red Dragon on both land and sea. They need to diversify and where better than India? The country is relatively inexpensive, English-speaking (an ironic throwback to Macaulay’s controversial education policies in the nineteenth century), and enjoys a well-established chemical, electrical and pharmaceutical manufacturing base. And as regards investment, recent anti-market regulatory crackdowns in China have turned more than a few eyes in India’s direction. Dependable trusts are growing and showing good returns - those in the know are talking of Pacific Horizon, India Capital Growth, and Ashoka India Equity to name but a few.
Even tourism, a traditionally underdeveloped asset in the subcontinent, is looking to bounce back now that vaccine misunderstandings between the UK and Indian governments have been cleared up. So all in all, even in what has been dark in recent days, India has many reasons to be cheerful.