India paves way for foreign investors
India's new government has actively been encouraging foreign inbound investment and financial reform, targeting Australian investors in both fixed income and equities, according to HSBC.
The rulebook for foreign investors has been simplified significantly in India and now does not need a local regulator for approval, Puneet Chaddha, head of HSBC Global Asset Management India told Money Management.
"You can go to a designated bank branch who can give you approval in a couple weeks… We are now growing faster than China and a few years ago it would have been seen as an impossible task," Chaddha said.
"The three areas of interest include investing into equities, fixed income or multi-asset strategies. In particular we have seen interest in equity exposures via global accessible ‘funds' or via bespoke mandates via foreign portfolio investor licences."
Chaddha noted that as interest rates are starting to come down it provides opportunities in both equities and fixed income asset classes.
"In terms of equities, foreign investors continue to see India as an attractive investment destination with approximately US$6.5 billion year to date in 2015 moving into equities, the highest among emerging markets," he said.
"There will be continued growth in particular areas including infrastructure related projects, railways, roads, and construction alongside the clearing of stalled projects and urbanisation."
Head of HSBC Global Asset Management Australia, Geoffrey Pidgeon, said the firm is looking to educate institutional investors about India's investment opportunities.
"From a debt perspective relative yields are much higher than what we are seeing around the world. But from an equity perspective what we are referred to as medium term growth, it is outstripping other countries from around the world," Pidgeon said,
"We're looking at it strategically more than ever and looking to educate what India will do in terms of direct investment in their portfolios. We need to keep in mind investors in Australia already have exposure to India in a broader emerging market equity in their portfolios."
Chaddha noted the interest in fixed income was also thanks to the average return of about 8.5 per cent, and equities that have an average return of 17 per cent over the last 35 years.
"I think you can expect volatility but we're very comfortable with the risk reward."
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