Growing India - lucrative space for Investing

The investment space in India from being in a nascent state has seen an upsurge of growth as the country has developed many folds over the last few years. With a growth rate of nine percent per annum, India is one of the largest growing economies in the world. Some of the senior economists are of the opinion that the Indian economy may have expanded at close to 9 per cent-in the three months from April to June 2010, which is its fastest pace in more than two years. This exponential rate of growth was driven by high industrial growth and increased private investments.

As over the years the regulations have been liberalized, India now sees a lot of FDI flowing in, more smoothly than before. Investment opportunities in India have resulted in an overall growth in various industrial sectors. Emphasizing on the infrastructure sector in March 2010, the Planning Commission expected the India investment opportunities in the infrastructure sector in 2010-11would be around US$ 500 billion (Rs 20 lakh crore). Whether it is medical, education or automobiles to real estate, Individuals now with higher disposable income see a lot of opportunities in this space and are better risk takers. However this enthusiasm is not without qualms. Adgully tries to discover what keeps investors from taking that plunge and how has the investment space grown in the last few years according to industry pundits.

According to most, this growth allows more young investors to enter this space. Mahesh Patil, Head - Equity, Domestic, Birla Sun Life Asset Management Company Ltd said, "India has witnessed significant step-up in economic growth rates during the last decade and equity markets have been a proxy to the same. With economy all poised to grow at high single digit growth rates, not only do the young investors get more disposable income in hand, but also get to participate in the growth and benefit by way of investing into equity markets."

"Today's young professionals in India are willing to take more risks, especially, when their country is growing at a fast pace of nearly 9%. With high disposable income and rise in awareness levels, the enterprising investors are keen to take a plunge into the equity markets as compared to just few years ago when young entrants preferred debt for a secured investment," said SanjayTripathy, EVP & Head - Marketing and Direct Channels, HDFC Life

"Also, with regulators ensuring long-term stability & security of the investors' money, young investors today are more confident.The robust growth in economy and multiple investment options have opened up a vast arena for the youth and we would soon see youth comprising significant portion of the total investor population", Tripathy further added.

A.K. Sridhar, Chief Investment Officer, IndiaFirst Life Insurance Copany Ltd said, "In terms of awareness, young investors are much more informed then what it was ten years ago. They are also much more responsible because there are more challenges now. The cost is going up and the want to have a comfortable life and the current young generation also want to ensure that the next generation will have a good life. He wants cost efficient product."

So what keeps some of the investors at bay and makes them skeptical or reluctant to plunge into this space?

According to Sridhar, "Investors at the end of the day wants to save on tax. In this space, how many exemptions or concessions is not the right thing to have. The government is going in the right direction but it takes some time for investor to accept which is why sometimes there is hesitation before entering this space."

Patil is of the opinion that investors who are focused on short term trades are wary of entering equity markets after having witnessed the aftermath of global equity meltdown in 2008. "However, it's important for investors to understand the cyclical nature of equity markets and the benefits of long term investments. In recent times, uncertainty prevailing over the course and pace of global economic recovery along with high volatility in the equity markets are keeping the investors at bay from entering the equity markets. Not having made any money over the three years horizon, even long term investors are skeptical of entering the markets," he further adds.

Tripathy points out three major things which keep entrants from this space. He talks about the current Indian market scenario being extremely volatile. This is a deterrent to young investors. "Usually their investments comprise a very small capital in market as they wait for considerable output. Generally this capital belongs to their savings, making the investor risk averse as he/she can't afford the risk of it sinking," he further explains.

Next he said that the frequent regulatory changes often lead to a lot of unrest among investors disrupting their investment objectives. It is often observed that the common objective of young investors while investing is to save tax. With lack of clarity on the tax exemptions under the "Direct Tax Code', investors are unwilling to expose their capital towards certain options like life insurance, tax-saver equity funds, etc.

Tripathy further said, "The biggest concern of all is the current inflationary pressures that India is facing. For any investor domestic inflation is the biggest concern for India in 2011, as it is expected to peak up to 9.5%. Escalating inflation tends to erode the stock market gains by making the investor's money less valuable; which again is a risk most newcomers are not ready to take."

Ravi G. Bhatia, VP, Commercial, Fiat said, "Young investors are looking at ease of doing businesses is very important. So maybe with the existing regulations, they are little hesitant to enter this space. However we are a robust society so there are a lot of opportunities."

According to these industry pundits, there will be a definite growth from corporate investment, Agriculture , Foreign Direct Investment, Banking and Financial sectors to even retail investment by way of mutual funds and stock trading.

Talking about initiatives like CNBC TV18 partnered with NSE's marathon called INVESTOTHON, Patil said, "Investment awareness initiatives are always welcome as they are very helpful to investors. Such initiatives help by way of engaging and educating people about the nuances of investments. It not only helps the investors to take more informed decisions, but also helps them create wealth."

With the regulations being more manageable and with increased rate of growth, one expects this space to explode even further and take the nation forward. | By Janees Antoo [janees(at)adgully.com]