Zooming in On India

The year 2022 has finally come to an end. S&P 500 was down almost 20% by the year’s conclusion, and Nasdaq was down about 32%. Nifty 50, however, was up 3%. This occurred despite the widespread turmoil in other developed and emerging nations, as well as the $33.3 billion net FPI redemption. By investing $39.2 billion domestically, Indian investors boosted the market’s spirits and contributed to India’s resilience and strength. While others think this decoupling will only last a short while, we think it marks the beginning of “India’s Decade,” a new period of growth and prosperity. Now, let us zoom into India.

1) This time it’s different

In contrast to the global financial crisis of 2008, when the credit market, and real estate markets heated up, the foundations are strong enough this time around and can withstand a potential global recession in 2023. This is demonstrated by the gross system credit growth rate, which peaked at 36% during the global financial crisis but is now just 9%. The corporate debt to GDP ratio, which is currently under 51% compared to a staggering 65% in 2008, is another sign that the road would be less tumultuous.

Apart from this, the banking system in India is recovering from a 7-year NPL cycle, but banks are nonetheless well funded, fundamentally positioning them to support solid credit expansion.

2) Manufacturing as an avenue of growth

Since 2014, the government has been eager to increase India’s manufacturing base and boost homegrown products’ competitiveness abroad. Supply-side problems have been lessened due to a lower corporate tax rate, the implementation of the GST, greater infrastructure expenditures, the improvement of logistical challenges, liberal FDI policies, and other legislative initiatives.

3) Digital Leverage

India’s wave of digital inclusion has opened the door for new growth opportunities and advantageously positioned the country to profit from upcoming technological and innovative advancements. Nearly 95% of the population now has a digital identity card thanks to the Aadhar Card, which has significantly increased digitalization throughout the nation. Additionally, UPI has changed the payments environment leading to five times as many digital payments in the last five years.

4) High Retail Investor Confidence

The resurgence of domestic investors has been the highlight of Indian capital markets in the last few years. When it comes to structural liquidity support during any significant market decline, domestic institutions and retail investors have established themselves as the backbone of the Indian equities markets.

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