Should Investors Be Considering Indian Stocks Amid Global Tensions

India is currently one of the world's fastest-growing economies on the back of strong manufacturing and services activity. Manufacturing and services indeces touched have hit record levels this year, and new orders and production have also increased this summer

Foreign exchange reserves in the $2.6 trillion economy increased as per the latest weekly Reserve Bank data. Additionally, both the World Bank and IMF expect India's economy to post stable growth this year.

India's broad-based index, Sensex, jumped 14.9 percent in the last year. With this in mind, investors tired with the ongoing global uncertainties pertaining to trade war may want to consider shifting some of their investments accordingly.

New Highs

The Nikkei India Manufacturing Purchasing Managers' Index (PMI) increased to 53.1 in June from 51.2 in May. Manufacturing activity not only reached its best level since December 2017, but also its second-best since October 2016. Strong increase in production and orders contributed to this performance in June.

Production advanced in June, posting expansion for 11 consecutive months. New orders rose to its highest level this year in June after expanding for eight straight months. Commenting on India's manufacturing activity, Aashna Dodhia, an economist at IHS Markit, said that the country's manufacturing sectors ended its fiscal first quarter "on a solid footing," following healthy demand conditions.

Additionally, Nikkei India Services Business Activity Index advanced from 49.6 in May to 52.6 in June, settling at its highest level since June 2017. After contracting in May, the service sector expanded in June, "against a backdrop of improving demand conditions" according to Dodhia. Improvement in demand conditions boosted the sector and led its employment growth to pick up from May's weak performance.

Forex Outlook Upbeat

India's Foreign Exchange Reserves increased from $405.08 billion to $405.14 billion for the week ended Jul 20, per data from the country's central bank, Reserve Bank of India (RBI). Foreign Exchange Reserves recovered on the aforementioned week after registering five straight weeks of decline. In its second bi-monthly monetary policy statement, the RBI retained GDP growth forecast for the country of 7.4 percent for the current fiscal 2018-19.

Meanwhile, the IMF lowered its growth projection for the economy from 7.4 percent to 7.3 percent for the current fiscal. However, India is still growing faster than its neighbor China, which is expected to register growth of 6.6 percent during the same period.

Moreover, per World Bank's figures, India's economy hit the $2.597 trillion mark in 2017, becoming the world's sixth-largest economy, surpassing France to claim the spot. Like IMF, World Bank has forecast that India will post GDP growth of 7.3 percent this fiscal.

Summing Up

Encouraging manufacturing and services activity, strong increase in production and orders, and recovery in foreign exchange reserves have put the spotlight on India's economy. Additionally, encouraging economic growth outlook by the country's central bank and international financial organizations like the IMF and the World Bank have also raised optimism. In this context, investors willing to move past global uncertainties should consider investing in companies from the world's fastest-growing economy.

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