It seems like everywhere you look, there is an article about the growing economy in India. The GDP has grown by 6% year on year, and the stock market continues to rise. The Indian economy still faces many challenges, including corruption, poverty, lack of infrastructure, high inflation rates, and low literacy rates.
While these problems are longstanding ones for India, they should consider them before investing money into what looks like an attractive market right now. So while it might seem like a good idea to put your money into Indian stocks right now because everyone else is doing so too (momentum investing). It may be better to wait until more data on the Indian economy is available, and we know if their GDP growth rate will continue at 6%.
1. Government Policies:
- While some policies may be controversial, the Indian government is doing a lot to attract foreign investment.
- The Prime Minister’s office has held meetings with CEOs and business leaders to get their perspectives on what India needs to improve its economy.
- He needs to follow through and make the changes necessary for foreign investors to feel comfortable putting their money into India.
2. Foreign Investment:
Recently, there has been great news about foreign companies investing in India and setting up production facilities here:
- Walmart is planning to spend nearly $1 billion in India shortly.
- Toyota wants to increase its production plant numbers from two to four over the next few years.
- Dell is looking for more places to open up shop, both nationally and regionally.
- Google wants to double the size of its workforce in India over the next few years.
3. Indian Stock market:
The Indian stock market has been on a tear recently, increasing by over 10% in the past month and making many investors very happy:
- When news about India’s economy is released, the stock market often jumps up due to increased trading volume.
- It could be because people buy stocks based on rumors or speculation rather than actual data about the economy.
4. Exchange Rates:
- The Indian rupee has been rising relative to the U.S. dollar lately.
- It means that foreign investors can buy more Indian stocks with their dollars now than they could have a few months ago.
- However, this rupee appreciation might be short-lived as inflation in India is still high and will likely remain elevated for the next few years.
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