All’s Still Well For India

The gathering of foreign dignitaries, including heads of many countries in the US, when the United Nations holds its general assembly session is considered by many to be a perfect place and time to draw attention on the world stage. Representing India was Prime Minster Narendra Modi while Xi Jinping, president of China, was leading the Chinese delegation. This naturally leads us to draw a comparison between them. In the US media Xi got better coverage than our prime minister; however, Modi drew the limelight when it came to attracting investment from the US. I believe this was one of the purposes for which he was there. Digital India is perhaps the biggest gainer from the prime minister’s trip with added benefits for the Make in India campaign in attracting investments and creating jobs. For example, Microsoft is partnering the government for providing low-cost broadband to 5 lakh villages across the country and Google has promised to give high speed WiFi connectivity at 500 railway stations by the end of next year.

Besides this, at one event Modi met 42 CEOs over dinner; the combined net worth of those present is estimated to be USD 4.5 trillion, as estimated by Forbes magazine. Although nothing concrete was achieved in terms of investment numbers, it definitely paved the way for future investments. I also see this visit with a different lens where the prime minister is making big promises on part of the government to attract investment. He said, “Reform in governance is my No. 1 priority. We are for simplified procedures, speedy decision-making, transparency and accountability”. This really calls for courage to stake his reputation on such a big stage. He assured all the CXOs he met of good governance.

Also, the timing seemed to be perfect. As China is facing difficulties at various levels with rising debt, slowing economy, increasing NPAs, ageing demography etc., someone from India should market the country as a replacement for China and the world’s fastest growing major economy. And who would be better to do this than the prime minister himself! The slowdown in China should be exploited to make the Indian economy stand up and be counted in the global arena.

Although some cynics are definitely questioning his foreign trips and its effectiveness, recent data points definitely points towards the change in mood of the investors. According to a Financial Times’ data service, India has emerged on top of the foreign direct investment league table, overtaking China and the United States. A ranking of the top destinations for greenfield investment (measured by estimated capital expenditure) in the first half of 2015 shows India at number one, having attracted roughly USD 3 billion more than China and USD 4 billion more than the US. The credit for this goes to the entire government that is working hard towards attracting investments. Recently, Finance minister Arun Jaitley went on a four-day visit to Asian financial hubs such as Singapore and Hong Kong to convince investors to invest in India’s infrastructure and manufacturing sectors.

The confidence in economy is getting back and this is pertinent to domestic investors also. In the last few months when the global stock market was in turmoil, the Indian equity market has shown a considerable level of stability compared to its global peers. One of the reasons is continuous support from the domestic mutual funds. In the last three months MFs have invested Rs 21,963 crore in the Indian equity market compared to withdrawal of Rs 14,210 crore by FIIs in the same period. For more details read our cover story that also recommends the best mutual fund schemes. This time we have recommended five best equity-diversified funds along with two sector-dedicated funds. I advise you to invest in a few of these schemes and as per what suits your risk profile. Also, keep in mind that SIP remains the best route. Equity as an asset class will remain one of the best wealth generating assets in the next few years and hence you should remain invested.

The recent bold rate cut of 50 basis points by the RBI will further increase the attractiveness of equity. With inflation held down by depressed commodity prices and Fed normalization in question amid global growth concerns, this was clearly expected from the monetary policy. I believe that now the transmission of the rate cuts will be important as this will help many debt-laden Indian companies.

In this issue we are carrying two special reports. One will highlight how to invest in uncertain times and the second is about how the government has fared in its Swachh Bharat Mission and its objectives. I believe that this issue will help you to make the right investment decisions. Please do write to us with your suggestions and feedback at comment@dsij.in.