DGIN - India's Economic Rise Demands Investor Attention

2023-08-04 06:12:00 ET

Summary

• India is carving out a unique niche in the global investment landscape and becoming a rising investment destination.
• The Pradhan Mantri Jan Dhan Yojana, a financial inclusion program, has led to the opening of over 400 million bank accounts as of 2021.
• India's equity market has mostly outperformed China's, and India’s trend of higher earnings growth is expected to continue to outpace China significantly.
• India is rapidly transforming into a powerhouse investment hub.

India's rapid digitization, thriving equity market, and demographic trends are creating compelling investment opportunities that we believe investors should be exploring.

India is carving out a unique niche in the global investment landscape and becoming a rising investment destination. Key drivers include:

• Expanding digital sector fueled by increasing smartphone users.
• Government-led initiatives promoting financial inclusion and fintech.
• Young, English-proficient workforce.
• Thriving equity market that has surpassed China’s.

In this blog, we delve into these dynamics, highlighting the emerging trends that make India an investment haven that demands attention.

Investment Opportunities in India's Rising Digital Sector

With over 800 million smartphone users and a rapidly expanding population, India presents a fertile ground for digital sector opportunities . This demographic trend is not confined to urban areas but is also making significant inroads into rural regions, expanding the digital consumer base. The digital revolution in India, fueled by increasing smartphone penetration and internet access, drives growth across various sectors, including e-commerce, digital payments, and online entertainment.

India’s Digital Revolution Drives Growth in Mobile Usage

According to TRAI, India is projected to have over 800 million smartphone users by 2023. This digital transformation is creating a ripple effect across the economy, opening up new avenues for businesses and investors. For instance, the e-commerce market in India is expected to grow exponentially in the coming years. Similarly, the digital payments sector is projected to reach new heights, driven by growth in mobile payments. These trends underscore the vast potential of India’s digital sector, offering a myriad of opportunities for investors. These opportunities encompass both the digital disruptors, in addition to the companies that are facilitating the disruptions (like traditional I.T. consultancy firms).

India’s Government Pushes for Financial Inclusion and Fintech

The Indian government's initiatives are pivotal in promoting financial inclusion and boosting the fintech sector. The Pradhan Mantri Jan Dhan Yojana (PMJDY), a financial inclusion program, has led to the opening of over 400 million bank accounts as of 2021. Another significant initiative is the Unified Payments Interface ((UPI)), a real-time payment system that has revolutionized financial transactions in India.

UPI: India’s Public Venmo

The National Payments Corporation of India (NPCI) reports that UPI transactions crossed 2.3 billion in volume and INR 4.3 trillion in value in January 2021, indicating widespread adoption of digital financial services. These government-led initiatives promote financial inclusion and drive the growth of the fintech sector, creating a conducive environment for investment.

Demographic Trends Deliver Competitive Edge to India

India’s demographics make the country well-positioned for unique expansion opportunities, especially compared to China. With a median age of 28 years, India has one of the youngest populations in the world. This young workforce is large and English-proficient, providing a competitive edge over other countries.

India’s Distinct Demographic Advantages vs. China

According to a recent report, India is the second-largest English-speaking country globally, a significant advantage for businesses looking to expand in the region. In contrast, China's population is aging, with the median age expected to reach 48 years by 2050. This demographic comparison underscores the potential that India holds as an investment destination. Combining a young, English-proficient workforce and a rapidly growing consumer base makes India an attractive market for both businesses and investors.

India’s Thriving Equity Market Overtakes China’s

India's equity market has mostly outperformed China's, and India’s trend of higher earnings growth is expected to continue to outpace China significantly. We believe this long-term outperformance is driven by a combination of factors, including economic reforms, strong corporate earnings growth, and positive investor sentiment. However, a disappointing COVID-19 recovery in China on the back of strict lockdowns in addition to geopolitical tensions may be behind India's short-term outperformance.

India has Significantly Outperformed China over the Last 3 Years

Across multiple benchmark indexes, including both the MSCI India Index and the IISL Nifty 50 Index, India has delivered significant outperformance versus China benchmark indexes, including the CSI 300 and the MSCI China Index. We believe this robust performance of India's equity market reflects the country's strong economic fundamentals and investors' positive outlook toward India's economic prospects. The expected higher earnings growth further enhances the attractiveness of India's equity market, making it a compelling investment destination, in our view.

India Earnings Outpacing China

Furthermore, after soaring to extended levels during the COVID-19 pandemic, valuations are finally returning to a more normal range.

Valuations in India Back to Normal

Now Is the Time to Invest in India

India is rapidly transforming into a powerhouse investment hub . Its booming digital sector, combined with a strong equity market, is drawing global attention. Additionally, the government's committed push for financial inclusion and fintech innovation is further fueling this interest. When compared to China, India's demographic advantage amplifies its allure. Simply put, we believe India's strong economic foundations and massive market potential make it an irresistible destination for investments.

Investing in India with VanEck

VanEck Digital India ETF ( DGIN ) offers exposure to companies involved in the digitization of the Indian economy.

VanEck Emerging Markets Fund ([[GBFAX]], [[EMRYX]]) offers access to the structural digital growth story of India for investors seeking technology or growth exposures in emerging markets.

VanEck India Growth Leaders ETF ( GLIN ) offers exposure to fundamentally sound Indian companies exhibiting attractive growth at a reasonable price.

Important Disclosure

MSCI India Index is designed to measure the performance of the large and mid-cap segments of the Indian market.

IISL Nifty 50 Index measures the performance of the top 50 blue-chip companies on the National Stock Exchange, as per their market capitalization.

CSI 300 Index is comprised of the 300 largest and most liquid stocks in the Chinese A-share market.

MSCI China Index captures large and mid-cap representation across China H shares, B shares, Red chips, P chips, and foreign listings (e.g. ADRs).

S&P BSE Sensex Index is a free-float market-weighted stock market index of the 30 largest, most liquid, and financially sound companies listed on the Bombay Stock Exchange.

This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities, financial instruments, or digital assets mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, tax advice, or any call to action. Certain statements contained herein may constitute projections, forecasts, and other forward-looking statements, which do not reflect actual results, are for illustrative purposes only, are valid as of the date of this communication, and are subject to change without notice. Actual future performance of any assets or industries mentioned are unknown. Information provided by third-party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third-party data. The information herein represents the opinion of the author(s), but not necessarily those of VanEck or its other employees.

An investment in the VanEck Digital India ETF may be subject to risks which include, but are not limited to, special risk considerations of investing in Indian issuers, equity securities, small- and medium-capitalization companies, communication services sector, information technology sector, emerging market issuers, foreign securities, foreign currency, cash transactions, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount and liquidity of fund shares, non-diversified and index- related concentration risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks. Small- and medium-capitalization companies may be subject to elevated risks.

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An investment in the VanEck India Growth Leaders ETF may be subject to risks which include, but are not limited to, special risk considerations of investing in Indian issuers, foreign securities, emerging market issuers, foreign currency, depositary receipts, information technology sector, basic materials sector, health care sector, energy sector, industrials sector, micro-, small- and medium capitalization companies, cash transactions, equity securities, market, operational, index tracking, authorized participant concentration, no guarantee of active trading market, trading issues, passive management, fund shares trading, premium/discount risk and liquidity of fund shares, non-diversification and index-related concentration risks, all of which may adversely affect the Fund. Emerging market issuers and foreign securities may be subject to securities markets, political and economic, investment and repatriation restrictions, different rules and regulations, less publicly available financial information, foreign currency and exchange rates, operational and settlement, and corporate and securities laws risks. Micro-, small- and medium capitalization companies may be subject to elevated risks.

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