“A sense of malaise” hangs over India, says Jeffrey Gettleman in The New York Times. The country is the world’s second worst-hit nation by the number of reported Covid-19 cases, and a tough lockdown earlier this year wrought immense economic and social pain. The economy shrank by an astounding 23.9% in the three months to June compared to a year before. Up to 200 million people risk falling into poverty.
Prime Minister Narendra Modi has proven an expert in the art of sweet-talking investors while failing to deliver on his promises, says Ritesh Kumar Singh in the Nikkei Asian Review. Recently his political formula has boiled down to “cash handouts” and culture wars.
New Delhi has also grown worryingly protectionist: Modi’s government has raised import duties on more than 3,600 goods “in order to indulge a few business cronies at the expense of consumers”. A return to the failed policies of the pre-1991 “Licence Raj” is the last thing India needs.
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The local BSE Sensex index remains down by more than 5% so far this year but has jumped by 50% since the March lows. Local investors appear to have caught stockmarket fever, says Benjamin Parkin in the Financial Times. The number of individual investors’ accounts is up by 20% for the year to July. Local brokerage Zerodha “handles more daily transactions” than Robinhood, the much-discussed US stock trading app. The Indian middle class traditionally prefers gold as an investment, but with jewellery shops closed they are going digital.
Foreigners are also joining in, reports Nupur Acharya on Bloomberg. They invested a net $6bn in shares in August, even as international money managers pulled funds from neighbouring markets. Overseas buyers hope local stocks will catch up after lagging other Asian bourses this year.
If you think the US market is dependent on a few giants, just look at India, says Ishika Mookerjee, also on Bloomberg. About 43% of the BSE Sensex’s gains since March have come from just one stock: energy and telecom behemoth Reliance Industries. Apple has contributed 11% of the S&P 500’s post-March gains.
The dominance of banking and energy stocks is a headache, says Reshma Kapadia in Barron’s. The tech sector is attractive. The earnings outlook is positive and local tech stocks trade on a 40% discount to US peers. The trouble is that investors who buy in through broad exchange-traded funds (ETFs) don’t get much exposure to the sector. India is one of those markets where it may be worth paying for the stock-picking savvy of an actively-managed fund. MoneyWeek likes the Aberdeen New India Investment Trust (LSE: ANII).
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