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How to use secular growth trends for investing

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Investing and knowledge are two pillars of your financial future. If you invest in the back of knowledge, you will build a solid foundation for wealth creation. There was a time when knowledge and information were available to only a select few. However, technology is now a significant enabler. There is a democratisation of information. It is available to those curious to know more about potential investments and those who are already actively investing.

There is much to learn from the big picture of the India story. There is a consensus among global agencies like the International Monetary Fund (IMF) and World Bank about India’s growth prospects. They expect the most populous nation in the world to remain the fastest-growing large economy for the next few years. India Ratings, an affiliate of global ratings agency FITCH, revised India’s growth estimate to 6.2% from 5.8% earlier.  The Federation of Indian Chambers of Commerce and Industry (FICCI), an industry body, puts the median economic growth at 6.3%, according to the latest survey. 

There is a lot of activity taking place in India’s infrastructure sector. That is probably an understatement. A recent press report suggests that India could see an investment of Rs 143 lakh crore or $1.8 trillion until 2029-30. Over the next six years, about Rs 24 lakh crore would be spent yearly to build the nation’s infrastructure. These are estimates by CRISIL, a credit ratings agency.

That has a significant influence on the way businesses seek these opportunities. To understand how the market is already looking at the opportunity, check out the stock performance of Larsen & Toubro, the country’s biggest engineering and construction company. It is considered a proxy for India’s infrastructure growth story. The share price is up 45%. That is when benchmark indices like the Nifty 50 and the Sensex have barely moved up 8% during the same time.

India Ratings, another credit ratings agency the India affiliate of global ratings agency FITCH, singled out the renewables energy sector. They observed a positive rating action (rating upgrades) in infrastructure asset operators. A release said that these companies had either their capacities coming online or strengthened their operating performance. The agency also observed that the financial sector has benefited from sustained credit growth due to rising retail loans and corporate loan growth.

The two developments above indicate that corporate balance sheets are more vital than ever. At the same time, banks are also in a position of strength to finance the expansion of corporates. Not long ago, India faced a ‘twin-balance sheet’ problem. The corporate and banking sector balance sheets were weak and caused a slowdown in the economy. 

The other indicator to look at is the positive commentary from the International Monetary Fund. The IMF foresees India’s contribution to global growth at 18% from the current 16%. The IMF attributes the solid economic performance to rising public expenditure and strong domestic consumption.  

You can create a basket of companies based on the potential for India’s infrastructure story. You can do it independently or use technology to help you with it.


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