Amid global economic slowdowns, India shows robust growth and strong investment potential, says DSP report
DSP Asset Managers has released its May report, #DSP7Sees, noting India's robust economic stability and growth amid global uncertainties.
According to the report, while many global economies have experienced a slowdown in manufacturing and services over the last year, India has maintained consistent economic output and business sentiment.
This suggests that India’s economic and business cycles can withstand global turbulence of manageable magnitude.
The report draws a stark contrast between the investment performances of India and China. Since 2007, despite China's unprecedented GDP and per capita income growth, its returns for investors have been minimal.
In contrast, India has emerged as one of the best performing markets globally, driven by substantial earnings growth from Indian corporations.
Over the past 30 years, China's compound annual growth rate (CAGR) of 14 percent in Gross Fixed Capital Formation outpaces India's 8 percent.
However, India's growth has been associated with higher returns on equity. Post-COVID, India has seen a resurgence in investments, backed by government spending, with $8tn spent on new investments over the past decade.
Despite the strong performance, Indian equities are not the cheapest among large emerging and frontier markets, reflecting their premium valuation. DSP suggests that while future performance is uncertain, the high valuation multiples are justified by the country's ongoing strong performance.
The report also highlights the potential of Indian financial institutions, including banks and non-banking financial companies, to offer rewarding investment experiences.
Factors such as the all-time low Non-Performing Assets (NPA) ratio and high Provision Coverage Ratio indicate a strong capacity to absorb potential losses, alongside a favorable Credit-Deposit Ratio.
Sahil Kapoor, market strategist and head of Products at DSP Asset Managers, advises, “Valuations respecting investors need to dial down their return expectations. Lower entry valuations are the best defense for investors seeking to invest in India for the long haul.”
