The India Story: 10 Time-tested Investment Trends
he last word on the global financial crisis has not been said yet. Just when many thought that capitalism was dead, things started looking up. The world quickly went into the recovery mode, led by emerging markets such as India and China. But the fears of a return to crisis-mode have not entirely gone away. In particular, most pundits think the US is not out of the woods. The developing global situation will very much be a consideration for the Indian investor, though the country, itself, is poised for a much more rapid growth phase. Short-term trends suggest a thousand things to confuse the investor. To bring clarity in this age of uncertainty, we looked at trends that have held true through the ups and downs of the world economy over several years. They represent the strong undercurrents of the economy and may very well last deep into the future.
Infographics by Minal Shetty & Hemal Sheth
Past: Since the last five years, the Indian markets have given the highest returns at 27% annually when compared to its other BRIC counterparts. This outperformance came with lower volatility.
Present: Many observers put India only at the second spot in investment attractiveness and give China the thumbs up, because India’s impressive growth is still slower than its northern neighbour’s.
Future: But, India is the best opportunity in the next five years. This outperformance could continue given the bottoms-up growth of its consumer market. China is more over-valued and more volatile.
Past: Government deficits and interest rates must typically move together. But this relationship was broken between 2003 and 2008, when interest rates fell even though deficits were rising.
Present: The yield on benchmark 10-year government bond is catching up rapidly with the fiscal deficit since 2008, as if to undo the divergence of the previous five years.
Future: The government’s spending on infrastructure and social sector will keep the fiscal deficit high. We may be looking at a high interest rate regime.
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