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India Is Still A Stock Picker’s Market, But Investment Horizon Should Be More Than 5 Years

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With India aiming to transform from a current USD 2.6 trillion economy to a USD 5 trillion economy over the next 4 to 5 years, there are many long term investment opportunities available in multiple sectors such as infrastructure, banking, non-banking financial companies (NBFC), fast-moving consumer goods (FMCG) and defence.

Even though currently there is some uncertainty in the market due to multiple reasons, there is no dearth of long term investment opportunities for investors who have an investment perspective of more than 5 years.

Post the FPI surcharge announced in the Union Budget 2019 on 5th July, Indian markets have been experiencing a free-fall. According to data released by National Securities Depository Ltd (NSDL), Foreign portfolio investors (FPI) were net sellers in July, withdrawing around Rs 12,419 crore from the Indian equity market, the highest since October 2018, when foreign investors withdrew Rs 27,622 crore from the stock market.

This huge outflow shows that investors have started shifting to other developing economies in their hunt for higher returns. This has made many investors worry about the road ahead for Indian equity markets. Another big reason for the current volatility is the fresh round of trade wars between USA and China.

However there is nothing to worry for investors who have made a long term investment as India’s growth story remains intact and an analysis of Indian stock market reveals that it follows the path of GDP growth over the long run.

It took around 60 years for India to become a $1 trillion economy but only seven years for its next trillion. Given the current rate of economic growth, India can easily touch the $5 trillion mark over the next 5 years. As the economy grows significantly, businesses will also report better growth and earnings. Currently many of these businesses are available at cheap valuations making them ideal for long term investment.

Here are some of the top reasons which makes India a stock picker’s market for long term investment:

  • Growing domestic consumption due to large and fast growing middle class with rising purchasing power, changing lifestyles and rising aspirations
  • Indian government’s continuously evolving investor friendly policy
  • 100% FDI through the automatic route in several sectors, without the need of government approval
  • India’s strategic and convenient location with easy access to markets of Gulf region, South East Asia and Europe.

Global industry experts are of the view that Indian markets will do better than international markets over the next few years. Even foreign investors know the potential for long term investment in India and that is why as per UNCTAD list of Investment, India remains the third-most preferred investment destination after US and China.

Read more:  How Long-term investing helps create life-changing wealth – TOI

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