Edmond De Rothschild has outlined their convictions for 2022 in a presentation to the press and India was included as a geography that saw strength in next year.
India has offered much promise for sometime now and some would argue it hasn’t quite lived up to expectations. However, Rothschild highlighted something could be afoot in India shares given their impressive returns in 2021, despite rising commodity prices.
India is net importer of fossil fuels and high commodity prices typically weigh on the economy. For Indian shares to rally through such a period suggests underlying optimism and a transitioning economy.
When Modi took power there was a significant level of hype around potential reforms. Modi outlined a wave of infrastructure programmes through ‘Make In India’ and there has been significant capital expenditure in India.
Although manufacturing has been robust with PMI consistently in the high 50s throughout 2021, Rothschild pointed to India’s tech sector and digitalised economy as a ‘promising theme for the coming years.’
India has a young population that are highly accustomed to the internet and digital world.
Indeed, there are 560 millions internet users in India, the largest in the world only behind China. Not only does this provide opportunities for business digital and tech businesses, it has created and environment where technology businesses can thrive.
Speaking at the press conference, Rothschild said they saw the potential for the next Alibaba or Tencent being a product of India’s thriving tech sector.
Rothschild also pointed to the favourable demographics of India. India has a young population which is increasingly entrepreneurial supporting a strong jobs market.
India also has a favourable taxation environment. Corporation tax in India is now less than that of the Euro Area and other advanced economies which will support investment in the years to come.
In addition to India, Rothschild also said they had conviction in European and Japanese equities.
In terms of broader conviction themes post COVID-19, Rothschild earmarked Climate Change, Big data, Human Capital and Health-Care.