Countries experiencing significant economic growth, generally have an entrepreneurial ecosystem. Strong growth allows more participants. Given the advancements being made in financialisation and digitisation in India, the environment is ripe for success in MSME’s (micro, small and medium enterprises) with most of the population having access to a bank account and financing as well as a smart phone and the internet.
India has over 6,000 listed companies on the National Stock Exchange and is now the world’s fourth largest stock market by country (by market capitalisation). It trails only the US (NYSE + NASDAQ), China (Shanghai and Hong Kong) and Japan (Nikkei), with a market capitalisation of US$5.5 trillion.
India also ranks 3rd in terms of the number of unicorns it has produced. A unicorn refers to the creation of a US$1bn company by valuation. India’s strong economic growth (over the last 30 years) and its entrepreneurial and aspirational corporate ecosystem provides the perfect melting pot for share market investors.
According to Bloomberg’s analysis, over the decade ending 2021, one fifth of the NSE 500 (top 500 stocks by market cap in India) had risen by 10 times in local currency terms over 10 years. As a comparison over the same period the NASDAQ saw 10% of companies do the same and the S&P 500 saw 7%. Despite faster growth in China only 3% of stocks from the mainland saw the same growth. However, this was not just a one-decade phenomenon in India. It also led all markets in producing 10 “baggers” in the decade from 2001-2011.
Thereby investing in a Fund, like the India 2030 Fund can provide investors with exposure to companies which can appreciate significantly. The chance of success improves when co-investing alongside some of India’s best fund managers when it comes to identifying good companies at an early stage in their growth cycle. Quite often these companies aren’t fighting for survival – they are in fact market leaders in their segment.
Although the India 2030 Fund is relatively “young”, having been launched in January 2022, it has already seen 5 of the 15 stocks it holds in its portfolio today, more than double and in one case, increase by 5 times. “Partnering” with investment professionals who spend their working lifetime trawling through India’s listed companies for opportunities, is likely to increase success rate in identifying well performed companies.
Quite often identifying successful companies early, benefitting from their “moat/IP” in a fast-growing industry, is likely to produce good results. This is particularly the case if these companies are identified before the onset of other institutional investors and being researched by stockbrokers. It is more likely to pay-off when you are invested before the broader investment community.
The reason why a market leader can create a 10-bagger experience in India is because addressable market size can grow significantly due to the tailwinds of strong underlying economic growth, the ongoing need for infrastructure and rising wealth of the middle class. The opportunity of a youthful population of 1.4 billion getting collectively wealthier provides a great backdrop for share market investors.
