Chinese stocks have performed poorly over the last two or three years. That’s given investors plenty of reasons to invest in India.
A recent article in Bloomberg highlighted why it makes sense to take some of your focus off of China—assuming you don’t have a problem investing in Asia—and move it into India, whose economy is gangbusters.
Of course, one of the top stories of India in 2023 was U.S.-based short-seller Hindenburg Research, suggesting the mighty Adani Group of companies committed all kinds of ethically challenged activities to further its family wealth.
There’s no question India remains somewhat of a Wild West economy. This is similar to how China has been perceived to be for many years and, to some extent, still is.
However, successful investors go where the money is most easily made, and right now, India is at the top of the list.
Here are three reasons to consider investing in India in 2024.
Starbucks Wants In
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The Bloomberg article I referenced in the introduction reported Starbucks’ (NASDAQ:SBUX) intention to double its store count in India. Over the next four years, it wants to open one store every three days. the company will focus on the openings in tier-2 and tier-3 cities. By 2028, it intends to have more than 1,000 locations open nationwide.
“‘Over the past 11 years, the India market has grown to become one of Starbucks fastest-growing markets,’ Chief Executive Officer Laxman Narasimhan, who is visiting the country this week, said in the statement. ‘With a growing middle class, we are proud to help cultivate the evolving coffee culture,’” Bloomberg reported.
As Narasimhan referenced, Starbucks has operated in India since 2012 through a 50/50 joint venture with a division of the Tata Group. The Tata Group is one of the country’s most powerful conglomerates.
In Q4 2023, the venture opened 22 net new stores in India, bringing the total to 390 in 54 cities. For some coffee chains, that’s a big deal. However, when right next is China, with more than 6,500, it’s peanuts.
Six countries have more than 1,000 Starbucks locations: the U.S., China, South Korea, Japan, Canada and the United Kingdom. India would be the seventh country, trailing the U.K. by nearly 300 stores.
Starbucks doesn’t make too many mistakes when identifying countries of opportunity. This indicates investors ought to be focusing on India in the future.
JPMorgan Can Think of No Better Asian Market
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JPMorgan Chase’s Asian Equity Strategist Mixo Das recently discussed India with CNBC.
“‘It’s our number one market at this point,’ he said, highlighting that the South-Asian nation will continue to benefit enormously as companies increasingly adopt a ‘China plus one’ strategy,” CNBC reported on Jan. 16.
HSBC projects that earnings in India in 2024 will grow at nearly 18%, putting it at or near the top of Asian countries. India’s stock market is so hot it is now the world’s seventh-largest, ahead of Hong Kong.
Interestingly, people in India tend to invest in smaller companies, whereas foreign investors have focused mainly on large-cap stocks. HSBC expects that this will continue in 2024.
The beauty of India for U.S. investors is that there are several ETFs you can invest in with significant net assets. I count five with at least $500 million in assets under management. While the biggest is the iShares MSCI India ETF (NYSEARCA:INDA) with $8.0 billion, I’d be more inclined to look at the iShares MSCI India Small-Cap ETF (NYSEARCA:SMIN). It has $683 million in net assets invested across 471 companies. Launched in February 2012, it’s got a 13.8% annual total return as of Dec. 31.
A Possible Drawback Could Be an Opportunity in Disguise
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The New York Times published an article on Jan. 2 arguing there is a disconnect between all the excitement in the Indian stock market and massive government investment in the country’s infrastructure and the money being invested by Indian companies in their businesses.
“Investment by Indian companies is not keeping pace. The money that companies put into the future of their businesses, for things like new machines and factories, is stagnant. As a fraction of India’s economy, it is shrinking. And while money is flying into India’s stock markets, long-term investment from overseas has been declining,” wrote the Times’ Alex Travelli.
Travelli does an excellent job highlighting the risks of investing in India. While there’s considerable excitement, the Modi government appears to have favored some business people over others, prompting many domestic businesses to keep their wallets firmly in their pockets.
However, the contrarian view is that once the dam breaks and businesses in India become more enthusiastic about the country’s growth prospects, foreign investment will skyrocket, sending Indian stocks even higher.
While India remains an emerging market, its goal is to become a developed market by 2047. That’s only 23 years from now. If you’re 40, start investing in India now, and you’ll have plenty by retirement.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
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I'm an investment enthusiast with a deep understanding of global financial markets, particularly the dynamics of Asian economies. My expertise is grounded in years of research, analysis, and staying abreast of the latest developments in the investment landscape. Now, let's delve into the concepts discussed in the article you provided.
The article makes a compelling case for investing in India in 2024, citing several key factors:
Starbucks Expansion in India:
- Starbucks intends to double its store count in India over the next four years.
- The company has been operating in India since 2012 through a joint venture with the Tata Group.
- Despite having 390 stores in 54 cities, India's Starbucks presence is significantly smaller compared to China.
- The expansion plan indicates Starbucks' confidence in India's growing middle class and evolving coffee culture.
JPMorgan's View on India:
- JPMorgan Chase's Asian Equity Strategist, Mixo Das, identifies India as their number one market.
- Companies adopting a 'China plus one' strategy are expected to benefit India significantly.
- HSBC projects an earnings growth of nearly 18% in India in 2024, positioning it at or near the top among Asian countries.
- India's stock market is now the world’s seventh-largest, ahead of Hong Kong.
Investment Opportunities in Indian ETFs:
- India's stock market attractiveness is reflected in the world's seventh-largest ranking.
- HSBC notes that Indian investors prefer smaller companies, while foreign investors focus on large-cap stocks.
- U.S. investors can tap into India's market through ETFs, with the iShares MSCI India Small-Cap ETF highlighted as an option due to its substantial net assets and historical performance.
Potential Drawback and Opportunity:
- The New York Times highlights a potential disconnect between the excitement in the Indian stock market and domestic companies' investment in their businesses.
- Long-term investment from overseas has been declining, raising concerns.
- The contrarian view suggests that once businesses become more optimistic about India's growth prospects, foreign investment may surge, leading to higher stock values.
India's Emerging Market Status and Future Goals:
- India is considered a somewhat Wild West economy, akin to China in previous years.
- Despite perceived risks, successful investors often prioritize where money can be most easily made.
- India's goal is to transition from an emerging market to a developed market by 2047.
In summary, the article presents a comprehensive view of India's investment landscape, emphasizing factors such as corporate expansion, market rankings, and expert endorsements. It suggests that despite challenges, India offers compelling opportunities for investors in 2024.