Please Note: This is a general commentary based on the analysis and opinions of the fund management team of the Kotak group and is not intended as a recommendation or for the purpose of soliciting any action in relation to any investments, or to be otherwise relied upon for any purpose. No liability is owed to any persons in respect of the content on this page. Kotak Mahindra (UK) Limited is authorised and regulated by the Financial Services Authority in the United Kingdom, by the Dubai Financial Services Authority and by the Monetary Authority of Singapore. Kotak Mahindra Inc is a member of FINRA.
As the Indian growth engine powers ahead, more and more overseas investors are looking at investing in India. Infact, there is ample reason for India's viability as a destination for foreign investment.
Improving macroeconomic fundamentals and greater integration with the world economy have increased India’s global competitiveness, placing the country on the radar screens of investors the world over. The market infrastructure, regulatory institutions and corporate governance, whilst not of the same standards as those of developed markets, are quickly catching up.
In addition to the above macro economic indicators, higher disposable incomes, emerging middle class, low cost competitive workforce, investment friendly policies and progressive reform processes are all likely to combine to make a strong case for India to have a larger share in the overall investment pie.
Also, Indian companies are becoming increasingly global in focus, competitive and are scoring well in innovation and sophistication of operations and adoption of the latest technologies from across the world. With disposable incomes rising, consumer products companies are witnessing good growth. Rising incomes combined with low-interest financing have also given the automobiles industry a big boost. India is also one of the fastest growing mobile phone markets, and mobile phone companies are poised to reap the dividends. (Source: India Brand Equity Foundation, September 2008)
Currently, the market capitalization is heavily skewed in favour of the larger companies. But there is ample growth potential for companies with strong fundamentals and sound business models in the mid-cap space.
However, recently, the resilience of India’s growth story has been challenged by various factors, global as well as local. The credit-risk crisis emanating from the US sub prime collapse has led to re-pricing of risk globally. The Indian equities market, being exposed to global investors, also experienced this wave of risk-aversion.
Despite these challenges we expect India to retain its position as the second fastest growing economy in the world, second only to China. India is one of the few economies growing at 5%+ levels (Source: Central Statistical Organization), making the country a real opportunity for investors looking for sustainable returns in the medium to long term.
Kotak’s international business focuses on providing India investment solutions to specialist investors looking at investing in India.
It should be noted that investments in India are subject to the normal risks associated with emerging markets, including but not limited to risk of losing some or all of the capital invested, high volatility, variable liquidity, geopolitical risks (including political instability), exchange rate fluctuations and restrictions on foreign investors. Investments in India should, therefore, be considered only as part of a well diversified portfolio.