India Stock Market Could Triple in a Decade – Barron's

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India is entering the digital age at breakneck speed, and that’s why stocks could triple even though they’re looking expensive, according to  Thornburg Investment Management.

In a fresh blog post, Thornburg editor Charles Roth points to a recent Morgan Stanley report on India that projects that the market capitalization of its stock market could roughly triple over the next decade to more than $6 billion. What’s underneath this: India has been working since 2010 to give each of its 1.3 billion people a biometric identity, and retina scans or fingerprints are complete on 1.2 billion. In addition, the government has been pushing for three years to establish a bank account for each of the 285 million Indian households. Each of those accounts will be mobile, and India has 800 million mobile users, roughly half have access to the internet.

Roth notes that the BSE Sensex Index’s price-earning ratio of 18.3 times, based on the next 12 months earnings is high. But, he says earnings growth supports multiples that move higher still:

” … The sectors poised to benefit the most are consumer-oriented and financials. Total online shoppers in India are set to skyrocket from 60 million to 475 million in 2027, while online retail as a percentage of total retail will grow even faster, from 2.2% today to 12.1% in a decade. Unsurprisingly, Amazon.com (AMZN), China’s Alibaba Group Holding (BABA) and South Africa’s Naspers (NPN.ZA and NPSNY) have been aggressively investing billions of dollars in India. Morgan Stanley figures Softbank (9984.Japan) alone has invested some $46 billion in local e-commerce and on-line payments, ride-hailing, and real estate platforms.

As for the financials, Morgan Stanley sees total loans increasing 11 percentage points to 78% of GDP by 2027; total mutual fund assets under management jumping more than ten-fold over the same period; and collected life and general insurance premiums spiking, as well. Fin-tech companies should see exponential growth …”

Shares of the iShares MSCI India exchange-traded fund (INDA) were up 0.4% Monday.

See the blog post, As India Crosses the Digital Divide, a New Era of Investment Opportunities Dawns.

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