Growing Indian Economy and Opportunities in Stock Markets

By Mr. M. L. Jhunjhunwala

From above it can be seen that Indian economy is growing at a rate which is higher than giants like China, other emerging and developing Asian countries and advanced economies like USA, Europe etc.

India has done exceedingly well in handing the crisis faced by the entire world due to Covid pandemic. INDIA not only ran the world largest vaccination programme but also exported vaccines to lot of countries who needed it.

Following are the other key highlights.

1. India is world’s fifth largest economy. Its economy size is now $3.75 trillion.
2. India is largest recipient of FDI Investment despite covid. Forex reserves are at a record high of $598 billion.
3. Share of India in global trade has increased from 2% to 2.2%
4. Share of India in global GDP increased from 2.6 % to 3.2%
5. India is second largest producer of steel.
6. India is fourth largest producer of Automobile. Will shortly overtake Japan.
7. India was a small producer of mobile phone. In 2022 India exported mobile phones worth $5 billion. Currently India is exporting mobile phones worth $1 billion every month. World’s largest mobile factory is in Agra. With PLI scheme in place, mobile component suppliers and ancillary suppliers are putting up factories for manufacture of mobile phones in India. It is nice to see that Made in India smartphones are being sold on the shelf of American retail stores.
8. Semiconductor chips is being produced by only 5 countries in the world. India is trying to bring a manufacturer to set up in India. If that happens it will boost Indian economy.
9. Inflation is high but the entire world is struggling with inflation. Europe and UK have inflation rates around 10%. USA has inflation of around 7-8 %. Inflation in India has come down around 4%.
10. Foreign Institutional investors have lost $280 billion in Russia. They are losing heavily in CHINA, & South Africa. It is only in INDIA that they have made money.
11. GST collection which was Rs.1.00 lac crores is now at Rs.1 .50 lac crore.
12. International players want to shift their business from communist countries to democracies.
13. There is no growth in USA/EU/Latin America, rather there is degrowth, but Indian economy is growing at steady pace.
14. Airports and infrastructure have increased in India.
15. India is investing heavily in green and alternative energy.
16. Private sector is now ready to invest to take part in growing economy.
17. IMF data says that India is the fastest growing economy.
18. Every top global brand is willing to set up a shop in India. Apple has opened its first store in Mumbai and is setting up stores in other cities. GLOBAL brands like IKEA, Decathlon, M&S, Zara, you name any brand it is here.
19. Indian merchandise exports are likely to touch $750 billion in next few years.
20. In FY 2024, overall capex of Rs.10 lacs crore is being planned.
21. DEMOGRAPHIC balance is in favour of India. India is a country of young people. At least till 2050 we will not be aging. Whereas other countries like China, Japan are aging.
22. Indian aviation market is growing. In May there were 13m air traveller.
23. EVERY hotel brand is increasing its room capacity and are setting up hotels in 2 tier and 3 tier cities.
24. REAL estate markets which was stagnant since 2015 is now looking up. Piled up inventories of flats and offices are getting sold. MNCs are taking large office premises on lease.
25. Developers are buying large parcels of lands. Stamp duty and registration fees collection are at record high.
26. Per capita income of India is going to increase from $2278 to $ 5242 by 2030.
27. Exports which are currently at 2.2% of global exports are likely to rise to 4.5% by 2030.
28. There are 11 crore DEMAT account holders in India and this number are steadily increasing.

Now look at the golden decade ahead.

Current Size of Indian Economy     : $ 3.75 TRILLION

First Target                                          : $5.00 TRILLIION

Second Target                                     : $10 TRILLION

• From all above indicators we can say that Indian economy is at a flash point. These data have a tremendous impact on Indian stock markets. BSE Sensex has given CAGR of 15.2 %.
• Indian investors are investing about Rs.14,000 crores per month in SIP which amount goes into stock markets to buy equities. Total Assets under Management with Mutual funds for equity investment is Rs.7.50 lac crores. Earlier when FIIs used to sell Indian stock markets would fall but now the situation has changed. When FIIs sell Indian investors are ready to buy.
• FIIs sold equity shares of more than $35 billion last year which was grabbed by Indian investors. Sensex is at all-time high of 63000 +.

World economies including India has passed through one of the worst crises but now the worst is over.

From above it can be seen that whatever India has earned in last 30 years, we can make in next 5 years, when in next 5 years Indian economy will double the net worth of every Indian will be doubled.

Opportunities in Indian Stock Markets

FROM all above it is clear that Indian economy is in growth mode and Indian growth story is intact. Economic development has a direct impact on stock markets.

As a sound investment strategy, one should not put all its eggs in one basket. One should ideally have a basket of investment as under.

Equities                        : 50%

Fixed income              : 15-20 %

Real estate                   : 10-15 %

Bullions                       : 10-15 %

Cash and bank                        : 5-10%

Out of above asset classes equities are most wealth creators. Other assets are wealth preservers. While investing in stock markets/equities, one must be incredibly careful, as investment in equities is subject to market risks.

As a sound investment strategy, one should look at the following criteria before investing in equities:

1. Business sector: One should look at the business sector to which the company belong to. If the business sector is performing well the companies in that sector are bound to do well. In the year 2023-24 following sectors are doing well and are worth watching:
2. AUTOMOBILES: Sales of cars, three wheelers, and two wheelers is increasing month by month. Production of E vehicles, E scooters is increasing. Sales of luxury and premium cars is increasing. In fact, there is long waiting list for premium cars. Most of the car makers are increasing capacities. In view of this investment in companies which are in this sector can give good returns.
3. BANKING: With growing economy banking sector is like to have a good run. Demand for credit will increase as new capex is being done. With rising income levels of Indians, more and more business is coming to banks. Banks has good opportunities in housing loans, auto loans and education loans. With higher spending on infrastructure, the business with banks will rise multi fold. If we look at the annual results of banks for FY 2023 profits of all banks has increased by 20 to 50 %. Asset quality of banks is also increasing as NPAs are at lower levels. With speedy resolutions on stressed assets through NCLT banks are recovering loans against which provisions has been made. Thus, investment in share of banks could give good returns.
4. CAPITAL GOODS: During Covid, most of the capital goods manufacturers cut down their costs and are now slim and trim. They are now ready to seize the opportunity which is arising due to increasing capital expenditure plan. Thus, one can look at investing in companies in this sector.
5. DEFENCE PRODUCTION SECTORS: Govt. of India is increasing its defence spending. With higher thrust on Indigenisation of defence equipment the Indian Defence product manufacturer are flush with order. Companies in this sector should do well.
6. Hospitality and Aviation: During covid hotel and airlines were the worst hit. After covid there is a tremendous increase in travel by Indians. Record numbers are flying. In May, a record no of 13 million passengers travelled through air. All hotels are full due to travel by Indians and increased weddings are taking place as destination wedding. Room tariffs are at record high. All hotel brands are increasing their capacity and setting up new hotels in Tier-2 and Tier-3 cities.
7. FMCG & RETAIL SECTOR: Economy has almost recovered from shocks of pandemic. Indian consumer has started spending and discretionary spending has also increased. Inflation is also under control, footfalls in shopping malls has increased. Thus, companies in this sector are expected to do well.

2. TRACK RECORD OF PROMOTERS & CORPORATE GOVERNANCE:

Second criteria to check before investing is to check track record of promoters of the company and the corporate governance in the companies. One should avoid companies where track record of PROMOTERS with dismal record. One should see that whether the promoters are fulfilling their commitments to shareholders. One should also see that proper corporate governance systems are in place.

3. DIVIDEND TRACK RECORD:

One should also see the dividend track record of the company. When company regularly pays good dividend, it is an indication that company is having good cash flow. There are companies who declare good profits but either do not pay dividend or pay extremely low dividend. One should avoid such companies.

After looking into above sectors, one should select good companies for investing.

One should invest only that amount which is saving and will not affect the routine life of the family if the amount invested is lost. While investing one should also adopt proper stop loss levels to minimise the losses in adverse situations.

The above are few guiding principles which one should be following while investing in stock markets. If one invests in equities after taking due precautions, it is expected that one can get good returns. There may be situation that out of 10 investments there could be losses in 2-3 cases but that is the case in all businesses. So, the growing Indian economy is offering tremendous opportunities, grab it. Those who do not take part in this will miss a great investment opportunity.

Disclaimer: Views expressed in the above article are personal views of the author. Anyone who intends to invest is stock markets should do it after proper study and research. Author is in no way responsible for any losses which the investor may suffer on his investment in stock markets.

Writer is former President of RSWM Ltd, a Cost Accountant by profession and an expert in forex management and foreign trade affairs; can be reached at – [email protected].