Sep 23, 2024 03:04 PM IST
A Jefferies report highlights India’s long-term attractiveness for growth-oriented investors despite high valuations.
Growth-oriented investors will get the best long term return in India, highlighted a report by Jefferies.
The report emphasized that Indian equities remain attractive in the long term, both on a five-year and ten-year investment horizon.
“This remains the best long-term opportunity for growth-oriented equity investors globally, both on a five-year view and a ten-year view,” the report stated.
However, the report pointed out the high valuations in the Indian market but noted the remarkable resilience displayed in the face of recent capital gains tax hike announced in the union budget. The market’s ability to withstand these challenges, according to the report, demonstrated the strong long-term outlook and investor confidence.
“While valuations remain an issue in the small-cap and mid-cap space, the remarkable resilience of the stock market in the context of the recent hikes in the capital gains tax is proof of the extent to which Indian households now believe in the long-term equity story also,” said the report.
The report also pointed out that India is still in the early stages of cultivating an equity investment culture. It added that currently, only 5.8 per cent of Indian household assets are in equities, compared to 13.3 per cent in bank deposits, which continue to grow at a rate of 10 per cent annually.
The report said, “India remains in the early days of building an equity culture.”
As per the report, mutual funds have emerged as a significant force in the Indian investment landscape, with assets totalling ₹67 trillion, growing at an impressive rate of 43 per cent year-on-year. Equity fund assets saw an even more dramatic rise of 60 per cent year-on-year, reaching Rs38 trillion by August 2024.
It also added that the growth in Indian stock market is fueled by strong inflows into equity mutual funds. A major driver of these inflows has been the popularity of Systematic Investment Plans (SIPs), where retail investors contribute a fixed portion of their monthly income into equities. SIPs have gained considerable traction, with 96.1 million active accounts.
“The latest data shows continuing strong inflows into equity funds…..the most stable inflow comes from the retail Systematic Investment Plan (SIP), where ordinary people invest a fixed portion of their monthly salary into equities. Monthly SIP contributions rose by 49 per cent YoY to a record Rs235 bn in August,” said the report.
The report concluded that, despite challenges such as high valuations, India’s growth potential, coupled with increasing investor confidence, makes it one of the most promising markets for long-term growth-oriented investment.
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