India has the necessary macroeconomic tailwinds to turn it into the next major investment destination, argues Saxo Capital Markets.
Saxo Capital Markets vice-president and Asia macro-strategist, Asia Pacific, Kay Van-Petersen said investing in India is a "long-term structural play" that will likely provide investors with significant returns.
Mr Van-Petersen argued that India’s current president, Narendra Modi, has significant political capital. For the first time in 30 years, India is governed by one party which was elected on a reform platform.
Research by Saxo Capital Markets indicates that the country’s demographics are also favourable, with 50 per cent of its population under the age of 25 and 65 per cent under 35.
India has a “young population who are going to be growing and spending for quite a few years, a lot of them are very educated and a lot of them also speak English,” said Mr Van-Petersen.
According to Mr Van-Petersen, the country is also set to overtake China as the most populous nation within 10 years, reinforcing its spending potential.
India’s growing population will require infrastructure, which is a sector that is currently “unpenetrated”.
“They have no infrastructure, so that’s decades of infrastructure building that has to be played in. [That's] decades of spending.
"If I'm right about India, it's going to be one of the hottest discussed markets, three, five and definitely 10 years from now."
According to Mr Van-Petersen, small and mid-sized enterprises are well placed to benefit from India’s macroeconomic trends and to provide investors with value.
“They will also predominantly be private rather than some of the bigger ones that may have some government share ownership or government oversight in essence," he said.
Mr Van-Petersen concluded that in the context of a weakening Australian equity market, Australian investors should consider diversifying into the Indian market to take advantage of long-term opportunities.
“This is an emerging market or frontier market and the risks are what they are but risks equate to potential returns," he said.