India has been badly affected by Covid-19. But the virus cannot change the compelling long-term growth outlook. With manufacturers seeking to reduce their exposure to China, India is emerging as a viable alternative. Prime Minister Narendra Modi’s offer of “red carpet” treatment to multinationals looking to base their operations in India bodes well, as do the country’s favourable demographics: more than 50% of the population are under the age of 25.
However, it is in India’s small and mid-cap companies that we see some of the biggest opportunities, particularly as they are welcoming home young entrepreneurial talent with a strong knowledge of best practice gained from employment or education abroad.
India’s small and mid-cap market has exciting growth potential and as valuations have fallen to near-15-year lows, now is an opportune time for investors to buy. For UK-based investors, buying individual Indian stocks can be a complicated process, but investment trusts such as ours offer an easy way to tap into India’s long-term story, particularly when it comes to owning illiquid but high-growth small and mid-cap companies.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Consumers’ caffeine hit
While masala chai remains the drink of choice, Indian consumers’ penchant for coffee has proved resilient in the face of Covid-19, with CCL Products’ (Mumbai: CCLP) share price up by 19% so far this year. This consumption play forms part of the private-label instant-coffee manufacturer’s new business model. It has launched its own brand, Continental Coffee, to take on the likes of current market leader Nestlé. This, along with its strong reputation globally – CCL Products has a growing customer base across 90 countries – has helped to maintain demand and we expect earnings to increase at a compound annual growth rate of 15% over the next three years. With low-cost manufacturing and high-quality products, CCL Products should continue to benefit from its reputable customer base and capture domestic consumption growth.
A switch to greener energy
As India considers its carbon footprint and shifts away from coal, Gujarat Gas (Mumbai: GUJGA), the country’s largest urban gas distribution company, is one to watch. With the National Green Tribunal mandating a switch to cleaner sources of energy, natural gas consumption is steadily increasing. Gujarat Gas has operations across 24 districts and is expanding its pipeline network (currently 23,000 kilometres long). The company expects to see earnings compound by an annual 14% over the next few years.
The world’s pharmacy
India’s pharmaceutical industry is a key beneficiary of the global drive to reduce reliance on Chinese imports. Divi’s Laboratories (Mumbai: DIVISLAB), a manufacturer of active pharmaceutical ingredients, already has a strong order book, but we expect this to grow as new opportunities arise. The company’s long-term relationships with top global healthcare innovators, strong research and development capabilities and near-complete programme to double its capacity make it a key contender. We expect Divi’s profits to compound at 16% over the next two years.
-
Inheritance tax reforms: government urged to rethink curbs on rural reliefsMPs want the government to delay changes to inheritance rax reliefs for farmers
-
‘I’m among the thousands of millionaires leaving the UK – the new tax rules don’t make sense ’MoneyWeek spoke to a serial entrepreneur who is leaving the UK following the abolition of the non-dom tax status
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
-
Buy-to-let returns fall 59% amid higher mortgage ratesBuy-to-let returns are slumping as the cost of borrowing spirals.
