Investment decade approaches India

Franklin Templeton conducted a survey in 22 countries which covered global investment sentiment. Of the Indian investors surveyed, over 80% predict that the domestic stock market will rise significantly in 2014. The sentiment doesn’t predict any different for the following years with belief that the next 10 years will be quite prosperous, especially in the area of fixed income returns.

Along with equity, property and precious metals are expected to perform the best. Considering recent market performance of precious metals in the market, property is most reliable according to Indian investors. Such sentiment is particularly welcomed, especially after subdued performance of equities over the last 5 years. Maybe this is why close to 60% of these investors still plan to be conservative in their investments for 2014. This is higher than the percentage of conservative investors globally in 2014 (52%).

One should keep in mind of the long term when planning investments, and this is why being risk-averse due to short-term events is a risky practice. This is especially true for the traditionally conservative Indian investor.

Why consider India as a business destination-I

India is a large and emerging economy that has been in focus over the last decade. One of the reasons for that is the large population, and the recent growth in GDP. In 2013, India’s GDP is expected to grow at a slightly lower rate of 5-6%, which is agreeably less than China’s projected growth of 8%. However, this is still far higher than rates of the US (2-3%) as well as Euro-area (<1%). India has a democratic establishment, and is a more convenient destination for entrepreneurs from the West.

There have always been concerns about bureaucracy in the country, which has further been highlighted by the policy freeze in 2012. Since then, however, the Government has been able to assuage business concerns by passing several market friendly policies. Industries have been opened up partially or, in some cases, entirely for foreign investments. Modern Retail, Insurance, Defence, Telecom, Media are just a few sectors that have increased the level of allowed foreign investments. Though, in some sectors, the level of investments allowed is not high enough, it does give investors a chance to test the Indian market. When the economy is further opened up, the experience gained over these years will be critical in managing future investments.

With the appointment of Raghuram Rajan as the new Governor of the Reserve Bank of India in September 2013, the Rupee has seen much lesser volatility in the market. He has taken it upon himself to correct the wrongs in the system to ensure inflation, which was skyrocketing for the past couple of years, is brought down to an acceptable level. This initiative has seen him make tough calls already in his first couple of months. Interest rates are also expected to fall accordingly, which will bring down the cost of money.