Get the right experience for you. Please select your location and investor type.
Why India:
Investing in the Indian subcontinent
The Indian subcontinent has been a fantastic investment destination over the last few decades....
Download PDF versionInvestment returns in the subcontinent have been primarily driven by India since she liberalised her economy in 1991. Investment into one of the earlier Indian indices would have yielded compounded returns of approximately 9% in USD from December 1992 to date. This compares very favourably with other global and emerging market indices over the same period.
Liberalisation and reform fires growth
1991 was an important year for India as the balance of payments crisis led to the liberalisation of the economy, setting her on an irreversible developmental path. Economic growth averaged roughly 4% in the three decades prior to 1991, and approximately 6% in the three decades following1. There is consensus cutting across political lines on the benefits of the 1991 liberalisation and the reforms adopted since. There is also broad agreement on the sustainable development challenges that need to be addressed for the next generation. Successive governments might differ slightly on how they approach these challenges but the direction of travel remains the same. Such continuity makes the region quite predictable.
Index returns since 31 December 1992
Source: Stewart Investors and FactSet as at 31 December 2022.
The region is home to roughly 20-25% of the world’s population1. India currently ranks 132 in the Human Development Index (HDI)2, while its neighbours aren’t doing much better. Many human development issues such as access to affordable finance, quality healthcare and education, and infrastructure are yet to be solved. An impending climate crisis means the subcontinent has to leapfrog many phases of evolution that the West or even China have endured. Evolution of mobile telephony, digital payments and e-commerce is evidence that such leapfrogging is both possible and desirable. India’s GDP per capita is USD 2,257 as per the World Bank estimates1. If the Indian economy grows at 6% per annum, we believe it will take India roughly 30 years to reach the standards of living we see in China today, as per our estimates. This is an attractive long-term opportunity for investors. However, a stable socio-political regime with sufficient checks and balances is necessary to stay on this development path.
The unsung heroes of long-term capital allocation
We believe it will take India roughly 30 years to reach the standards of living we see in China today as per our estimates. This is an attractive long-term opportunity for investors.
It is rare to see tens of thousands of people protest peacefully outside a nation’s capital for months. It is more rare in the polarised times we live in. The Indian farmer protests in 2020 were a sign that society can challenge the prevailing government of the day. It is not the first time. Back in 2012, there were peaceful anti-corruption protests across the nation, which eventually led to the fall of the previous government.
The ability of companies and society to engage with governments and hold them accountable where necessary is key for the sustainable development of economies. Institutions - such as the judiciary, state governments, media, the not for profit sector, an independent central bank - and the many rights for citizens enshrined in the Indian constitution provide a solid foundation upon which the economy is being built. These are the unsung heroes of long-term capital allocation.
A steady current of reforms beneath a vibrant (and noisy) democracy
India’s vibrant and often loud democracy is misunderstood as chaotic and risky. We believe the opposite is true. Underneath the surface is a steady current of reforms and progress. India’s diversity and the need to pursue a different development path to the West requires a more patient investment approach. We struggle far more with the opacity and the binary risks that come alongside investing in high-growth, authoritarian regimes. However, investing in the subcontinent is not without risks and potential market volatility. Fragile borders, water shortages, rising social divisions, inequality and climate change are key challenges. Yet the biggest challenge is to improve the standards of living of more than a billion people living in the subcontinent.
A reward for patient investors?
Consensus on economic reform across political lines, a democratic system with checks and balances, a long runway for growth, and a rich universe of high-quality companies makes India an attractive destination for long-term investors. We are optimistic that the Indian subcontinent should continue to reward patient investors with sound absolute returns in the coming decades.
Stewart Investors’ approach to investing in India
- We are long-term investors.
- We are absolute-return investors. We treat risk as the permanent loss of capital.
- We invest in companies that contribute to, and benefit from, sustainable development.
- We have a proven track record of investing in the Indian subcontinent since 1991.
Investment terms
View our list of investment terms to help you understand the terminology within this document.
Subscribe to our updates
To get regular updates and content from Stewart Investors, please register here.
Important Information
This material is for general information purposes only. It does not constitute investment or financial advice and does not take into account any specific investment objectives, financial situation or needs. This is not an offer to provide asset management services, is not a recommendation or an offer or solicitation to buy, hold or sell any security or to execute any agreement for portfolio management or investment advisory services and this material has not been prepared in connection with any such offer. Before making any investment decision you should consider, with the assistance of a financial advisor, your individual investment needs, objectives and financial situation.
We have taken reasonable care to ensure that this material is accurate, current, and complete and fit for its intended purpose and audience as at the date of publication. To the extent this material contains any measurements or data related to environmental, social and governance (ESG) factors, these measurements or data are estimates based on information sourced by the relevant investment team from third parties including portfolio companies and such information may ultimately prove to be inaccurate. No assurance is given or liability accepted regarding the accuracy, validity or completeness of this material and we do not undertake to update it in future if circumstances change.
To the extent this material contains any expression of opinion or forward-looking statements, such opinions and statements are based on assumptions, matters and sources believed to be true and reliable at the time of publication only. This material reflects the views of the individual writers only. Those views may change, may not prove to be valid and may not reflect the views of everyone at First Sentier Investors.
To the extent this material contains any ESG related commitments or targets, such commitments or targets are current as at the date of publication and have been formulated by the relevant investment team in accordance with either internally developed proprietary frameworks or are otherwise based on the Institutional Investors Group on Climate Change (IIGCC) Paris Aligned Investment Initiative framework. The commitments and targets are based on information and representations made to the relevant investment teams by portfolio companies (which may ultimately prove not be accurate), together with assumptions made by the relevant investment team in relation to future matters such as government policy implementation in ESG and other climate-related areas, enhanced future technology and the actions of portfolio companies (all of which are subject to change over time). As such, achievement of these commitments and targets depend on the ongoing accuracy of such information and representations as well as the realisation of such future matters. Any commitments and targets set out in this material are continuously reviewed by the relevant investment teams and subject to change without notice.
About First Sentier Investors
References to ‘we’, ‘us’ or ‘our’ are references to First Sentier Investors, a global asset management business which is ultimately owned by Mitsubishi UFJ Financial Group. Certain of our investment teams operate under the trading names FSSA Investment Managers, Stewart Investors, RQI Investors and Igneo Infrastructure Partners, all of which are part of the First Sentier Investors group.
We communicate and conduct business through different legal entities in different locations. This material is communicated in:
- Australia and New Zealand by First Sentier Investors (Australia) IM Ltd, authorised and regulated in Australia by the Australian Securities and Investments Commission (AFSL 289017; ABN 89 114 194311)
- European Economic Area by First Sentier Investors (Ireland) Limited, authorised and regulated in Ireland by the Central Bank of Ireland (CBI reg no. C182306; reg office 70 Sir John Rogerson’s Quay, Dublin 2, Ireland; reg company no. 629188)
- Hong Kong by First Sentier Investors (Hong Kong) Limited and has not been reviewed by the Securities & Futures Commission in Hong Kong. First Sentier Investors, FSSA Investment Managers, Stewart Investors, RQI Investors and Igneo Infrastructure Partners are the business names of First Sentier Investors (Hong Kong) Limited.
- Singapore by First Sentier Investors (Singapore) (reg company no. 196900420D) and this advertisement or material has not been reviewed by the Monetary Authority of Singapore. First Sentier Investors (registration number 53236800B), FSSA Investment Managers (registration number 53314080C), Stewart Investors (registration number 53310114W), RQI Investors (registration number 53472532E) and Igneo Infrastructure Partners (registration number 53447928J) are the business divisions of First Sentier Investors (Singapore).
- Japan by First Sentier Investors (Japan) Limited, authorised and regulated by the Financial Service Agency (Director of Kanto Local Finance Bureau (Registered Financial Institutions) No.2611)
- United Kingdom by First Sentier Investors (UK) Funds Limited, authorised and regulated by the Financial Conduct Authority (reg. no. 2294743; reg office Finsbury Circus House, 15 Finsbury Circus, London EC2M 7EB)
- United States by First Sentier Investors (US) LLC, authorised and regulated by the Securities Exchange Commission (RIA 801-93167)
- other jurisdictions, where this document may lawfully be issued, by First Sentier Investors International IM Limited, authorised and regulated in the UK by the Financial Conduct Authority (FCA ref no. 122512; Registered office: 23 St. Andrew Square, Edinburgh, EH2 1BB; Company no. SC079063).
To the extent permitted by law, MUFG and its subsidiaries are not liable for any loss or damage as a result of reliance on any statement or information contained in this document. Neither MUFG nor any of its subsidiaries guarantee the performance of any investment products referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk, including loss of income and capital invested.
© First Sentier Investors Group