Navigate India's growth trajectory by investing in the manufacturing theme
India is now the biggest country in the world, in terms of its population, and this humungous number serves as the backdrop on which the domestic consumption story rests.
2023 has been a stupendous year for India – earlier this year, the country toppled the United Kingdom to ascend to the rank of the fifth largest global economy, in terms of GDP. Further, India also showcased its diplomatic finesse and soft power during its G20 presidency, wherein the country’s leadership was instrumental in driving consensus on several key issues. These included the formation of a global Digital Public Infrastructure, the acceptance of the African Union into the G20 fold, as a permanent member, and progress on imperative climate initiatives. Throughout these monumental wins, the country’s capital markets have been on the rise – unencumbered by the high interest rates or the fears of a potential global slowdown.
Assessing India’s potent future:
In fact, just recently, the International Monetary Fund stated that India has emerged as one of the “star performers”, on a global scale, and forecasted that the country would contribute a massive 16% to global growth, in this year. With the domestic economy growing at a robust rate, reports project that India will attain the position of the fourth largest global economy, in terms of GDP, by 2026 and ascend to the third spot by 2027. This spectacular run will also be enabled by the incumbent government, which has essayed an instrumental role in building India’s popularity on the global stage. Given that the BJP is expected to win another Lok Sabha term in the upcoming elections, India’s dream run seems set to continue into the future. In this glittering scenario, many investors are keen on capitalising on the booming growth story depicted by the domestic economy – an opportunity that must not be missed at any cost. So, what are the sectors and themes which will propel the markets forward as India continues to grow in a sustainable manner?
Opportunities galore in consumption:
India is now the biggest country in the world, in terms of its population, and this humungous number serves as the backdrop on which the domestic consumption story rests. From luxury apartments and fancy cars to top-end consumer goods and flagship smartphones, India’s growing upwardly mobile demographic is consuming goods at an incredible pace, thereby offering investors multiple opportunities to capitalise on this trend. With a bevy of earning opportunities, as well as easy access to credit, Indian consumers are spending on premium products and experiences, and urban areas are witnessing a bulk of this consumption. Accordingly, investors can consider building positions in fundamentally strong companies belonging to sectors such as fast moving consumer goods, semiconductors, hotels, travel, real estate, consumer durables, and auto, among others, with a medium to long-term horizon.
Manufacturing & exports set to explode:
The recent shift in focus among analysts and investors towards India’s domestic manufacturing sector is indicative of the nation’s expected dominance in global manufacturing in the coming years, largely driven by the government’s Production Linked Incentives (PLI) scheme. The scheme anticipates an addition of INR 5 trillion in manufacturing capacity and the creation of 3.6 million jobs, supported by a government investment of INR 2.8 trillion over seven years. Further, after modest returns between FY15-19, the sector has outperformed peers since March 2021, due to structural changes and is set to expand further given the government’s ambition to elevate India to the world’s third-largest economy. Going forward, this projected expansion of India’s manufacturing sector will empower the domestic exports theme, creating a double-barrelled growth engine for the Indian economy. Already, the services segment is contributing robustly to exports and with the focus now on manufacturing, the theme is set to expand significantly, unlocking potent opportunities for investors with their pulse on India’s growth story.
For investors who are bullish on India’s prospects, the playing field is enormous – from a multitude of sectors such as FMCG, real estate, auto and consumer durables, to potent themes such as consumption, manufacturing and exports, the potential upside could be staggering in its magnitude. And the means of investment are aplenty – from direct equities to sectoral and thematic mutual funds, all you have to do is start right away, to capitalise on this massive opportunity. Given that the story is likely to unfold over the coming years, investors can opt to invest in a staggered manner via SIP.
By RACHIT PRAKASH NIGAM,DIRECTOR,RACHIT FINANCIAL SERVICES