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India Poised for Another Strong Performance

The highly regarded British economist Jim O’Neill told the Nikkei Asian Review recently that he was “excited” about India under the leadership of Prime Minister Narendra Modi.

O’Neill, the ex-Goldman Sachs Asset Management chairman, and the man best known for coining the term “BRIC”—the acronym that stands for Brazil, Russia, India, and China—says it is the best leadership the country has had in a generation. He also believes that, together with lower oil prices and demographics, the country could outgrow China, expanding at a rate of more than 7.5% for the remainder of the decade.

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If you haven’t been paying attention, India had an astounding 2014 in terms of market performance. Indian ETFs surged last year and put up performance numbers that would fill almost any mediocre fund manager with envy.

A quick glance at the top Indian ETFs show that some of their YTD returns are already roughly 10% or more, with one year returns averaging over 40%.

Prime Minister Modi has been characterized differently by many within the global media, but one recurring theme is that he is “pro business,” and is determined to change how the international business community views India.

Whether your opinion is positive like O’Neill’s, or more skeptical like Jim Roger’s (see video below), a little bit of India in your portfolio is definitely not going to hurt—yes, even at current market valuations—especially when compared to any developed market around the globe.

O’Neill puts it another way, “China growing at 7% adds another trillion U.S. dollars to global GDP, and in purchasing power parity (PPP) terms is more than double the United States. This year India will add more than double the United Kingdom (the strongest G7 country outside the United States) in PPP terms to global GDP.”

In other words, emerging markets, especially China and India, are still the driving forces behind the global economy.

  • Swift

    So you cheerlead the Indian market but the US is a bubble?

    • Not exactly cheer-leading but since you asked I can if you want…

      The glaring difference is that U.S. markets were synthetically tweeked by the Fed and money printing. India on the other hand is poor, has vastly better demographics filled with hungry entrepreneurs, and desires to catch up to the rest of the world.

      Moreover, valuations are high in both countries, but EMs are better short and mid-term bets. Where would you want to put money? In a country barely able to expand 2%pa or a country just short of 8%? Besides, EM’s dynamics are nothing short of astounding. But in the U.S. when 4 conglomerates (sarcasm) own everything it’s hard to use the word “dynamic” about the economy and its players.

      Thanks for the comment!

  • Suaz

    China is certainly scary. The shadow banking system could bring the whole curtain down and destroy the entire global economy. Japan is a basket case. The U.S. is too mature and can only create war. The EU has a Greece, Italy, and Spain problem.

    Stocks, bonds, and currencies are very very risky. A smart investor would focus on real estate and gold for the next decade,