Investors head for India

Voting in the world’s largest election began this week in India and this time investors are looking forward to the results.


Markets are counting on more Modi magic
(Image credit: 2019 Getty Images)

Voting in the world's largest election began this week in India. There are 900 million eligible voters, so the process will take several weeks. Elections often cause volatility in emerging markets, but this time investors have been looking forward to it. The local stockmarket's Nifty 50 Index has risen by 16% over the last six months; in March alone, foreign investors funnelled more than $6bn into Indian equities, notes Ameya Karveon Bloomberg.The prospect of another term for incumbent Narendra Modi and his pro-business agenda has bolstered confidence. Achievements include a new bankruptcy code and a national goods-and-services tax (the equivalent of VAT), which replaced a wide array of regional levies that had hampered trade.

For now, however, further potential reforms have been overshadowed by a pre-vote competition by the two main parties "to shower money on the indigent", says The Economist. The governing Bharatiya Janata Party (BJP) pays benefits to farmers who own less than five acres of land. The Congress party has promised cash payments to 50 million of the poorest households. "These ideas need rethinking." Instead of throwing money at the crowd, India needs to reform its safety net, which often fails to reach those in dire need. It is both "immensely complicated, with more than 950 centrally funded schemes and subsidies, and stingy". India is already running a high fiscal deficit, and any new government will need at least two years to pull it back to 3%, says Devangshu Datta on Quartz. At the same time, tax revenues are below their target estimate.

A massive consumer market

India is also less vulnerable to a global slowdown than other countries in the region: exports comprise just 20% of its GDP. Our favourite India play is the Aberdeen New India Investment Trust (LSE: ANII), which is on a discount of 14% to its net asset value.

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Ignore the bitcoin bounce

Dramatic price swings are nothing new with bitcoin. As with previous rallies, the current spike has led some investors to believe that bitcoin is back, fuelling cryptocurrency investors' hope that the currency will establish itself in the long run.It won't, says The Economist. Cryptocurrencies have been around for a decade now, yet buying goods and services with them "remains a niche pastime". What's more, the underlying technology "is too clunky to operate at scale".

For example, the bitcoin network can only processseven transactions per second (compared with Visa, whichcan handle tens of thousands).Then there's fraud. "Transactions are irreversible," which is "a boon for con artists. Pyramid schemes are rife while cryptocurrency exchanges often collapse or are hacked." Ignore this asset class.

Marina Gerner is an award-winning journalist and columnist who has written for the Financial Times, the Times Literary Supplement, the Economist, The Guardian and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany.

Marina is also an adjunct professor at the NYU Stern School of Business at their London campus, and has a PhD from the London School of Economics.

Her first book, The Vagina Business, deals with the potential of “femtech” to transform women’s lives, and will be published by Icon Books in September 2024.

Marina is trilingual and lives in London.