Rising to the occasion: India in the twenty-first century
Emerging Market Equities Portfolio Manager Matthew Culley and the Janus Henderson Research Team explain how India is leveraging government reforms and innovation to position itself to deliver strong economic and earnings growth.
9 minute read
Key takeaways:
- India’s reformist government recognizes that an innovative private sector has a pivotal role to play in achieving the country’s economic and social goals.
- To help seize the opportunity, India has prioritized building out physical, digital, and social infrastructure.
- Further buoying India’s position as a potential investment destination are a restructuring of global supply chains and flagging developed market growth.
In an era where globalization appears to be on the wane, the landscape for investing in emerging markets (EM) is shifting. A dispersion of economic prospects should result in both winners and losers. Consequently, investors seeking to access the powerful secular growth themes embedded in emerging regions will have to be more discerning. We believe a sweet spot going forward will be EM countries that possess both a reformist government and an innovative private sector. India is one such country.
This nexus, along with India’s favorable demographics, aligns with the country, company, and governance approach that, in our view, serves as an effective framework for EM investors.
Within the EM asset class – especially during a period of economic and policy transition – investors may understandably place considerable emphasis on the macro. We have written extensively on the country aspect with respect to India’s reformist government and will provide a sufficient summary in this note, but our focus will be on the company level – namely the sectors in which well-positioned and innovative businesses thrive. Over the long term, one of the main determinants of equity returns is earnings growth. A favorable macro backdrop and robust corporate governance matter insofar as these factors set the stage for companies to invest, innovate, and grow.
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Emerging market investments have historically been subject to significant gains and/or losses. As such, returns may be subject to volatility.
Foreign securities are subject to currency fluctuations, political and economic uncertainty, increased volatility and lower liquidity, all of which are magnified in emerging markets. Fixed income securities are subject to interest rate, inflation, credit and default risk. As interest rates rise, bond prices usually fall, and vice versa.
Volatility measures risk using the dispersion of returns for a given investment.
These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.
There is no guarantee that past trends will continue, or forecasts will be realised.
Marketing Communication.
Important information
Please read the following important information regarding funds related to this article.
- Shares/Units can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- Shares of small and mid-size companies can be more volatile than shares of larger companies, and at times it may be difficult to value or to sell shares at desired times and prices, increasing the risk of losses.
- Emerging markets expose the Fund to higher volatility and greater risk of loss than developed markets; they are susceptible to adverse political and economic events, and may be less well regulated with less robust custody and settlement procedures.
- The Fund may use derivatives to help achieve its investment objective. This can result in leverage (higher levels of debt), which can magnify an investment outcome. Gains or losses to the Fund may therefore be greater than the cost of the derivative. Derivatives also introduce other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
- If the Fund holds assets in currencies other than the base currency of the Fund, or you invest in a share/unit class of a different currency to the Fund (unless hedged, i.e. mitigated by taking an offsetting position in a related security), the value of your investment may be impacted by changes in exchange rates.
- Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
- The Fund may incur a higher level of transaction costs as a result of investing in less actively traded or less developed markets compared to a fund that invests in more active/developed markets.
- The Fund could lose money if a counterparty with which the Fund trades becomes unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider.
Specific risks
- Shares/Units can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
- Shares of small and mid-size companies can be more volatile than shares of larger companies, and at times it may be difficult to value or to sell shares at desired times and prices, increasing the risk of losses.
- Emerging markets expose the Fund to higher volatility and greater risk of loss than developed markets; they are susceptible to adverse political and economic events, and may be less well regulated with less robust custody and settlement procedures.
- If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
- The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
- If the Fund holds assets in currencies other than the base currency of the Fund, or you invest in a share/unit class of a different currency to the Fund (unless hedged, i.e. mitigated by taking an offsetting position in a related security), the value of your investment may be impacted by changes in exchange rates.
- When the Fund, or a share/unit class, seeks to mitigate exchange rate movements of a currency relative to the base currency (hedge), the hedging strategy itself may positively or negatively impact the value of the Fund due to differences in short-term interest rates between the currencies.
- Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
- The Fund could lose money if a counterparty with which the Fund trades becomes unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider.
Specific risks
9 minute read
Key takeaways:
- India’s reformist government recognizes that an innovative private sector has a pivotal role to play in achieving the country’s economic and social goals.
- To help seize the opportunity, India has prioritized building out physical, digital, and social infrastructure.
- Further buoying India’s position as a potential investment destination are a restructuring of global supply chains and flagging developed market growth.