India marks traditional festival amid fast-paced modernisation
Long-term trends of industrialisation and consumerism continue unabated, according to M&G’s Graham French
As the centuries-old Diwali ‘festival of lights’ begins in India this weekend, the country’s transformation into a global economic powerhouse continues to gather pace. India is now one of the world’s fastest growing economies, forecast to expand by 5.4%* in 2010 while much of the world remains stagnant. Investment in roads, hospitals and housing is generating jobs, putting money in people’s pockets and creating a fast-growing ‘middle class’ keen to spend money and improve their quality of life.Traditionally, Indians exchanged modest gifts for the annual festival, while worshipping the goddess of wealth. Today they are just as likely to give iPods or DVDs, reflecting the growing individual wealth and appetite for western goods on the subcontinent.
India, along with China, is placing huge demand on natural resources which are in short supply. In addition, the country’s growing affluence is bringing a new generation of brand-conscious consumers, with increasing disposable income to spend on goods like cars, clothes and TVs.
Graham French, manager of the M&G Global Basics Fund, says: “These long-term trends bring huge investment potential not just in resources stocks, but in a whole range of well-managed, asset-rich companies in diverse industries that are benefiting from growing demand in India.”
The Indian stockmarket has been performing extremely well this year, prompting some commentators to suggest it may become overheated. Rather than investing directly in Indian-listed stocks, Graham French prefers to hold well-established businesses domiciled in developed countries, but whose operations are benefiting from the structural trends taking place in emerging markets such as India.
• Unilever, one of the world’s largest consumer products companies, produces many of the world´s best known household brands including Hellmann’s, Flora, Surf and Dove. Unilever is benefiting from the populations of fast-growing countries such as India becoming increasingly wealthy and eager to purchase western goods. Developing and emerging countries account for around half of Unilever’s overall revenue. The company is a cash generative, well-established business with a strong competitive position in all its markets.
*IMF World Economic Outlook October 2009
