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India's rise to the top: An Investors guide to the next most populous country.

Since the UN began collecting population data in 1950, China has been the worlds most populous country. That era, though, appears to be coming to an end. India is gearing up to become the world's most populous country, according to the United Nations Population Fund, with this landmark event set to take place in mid-2023. But what does this mean for the countries economy, and what can we expect from the Indian stock markets and financial system going forward?

India's strategic positioning in the ongoing Ukraine conflict has come under the spotlight, but has also massively helped the country's economy. India has been able to trade with more freely than the rest of the world and has also become an attractive destination for foreign investment, especially as tensions between major world powers continue to rise.

Recent government efforts to cut red tape and simplify regulations have also acted as a positive step towards attracting more foreign investment and boosting economic growth. The government's 'Make in India' campaign, which aims to promote manufacturing in India, has already led to increased investment from companies like Samsung and Foxconn.

Finally, the BRIC’s recent push away from the US Dollar for international trade has also affected the country's economy in a big way. In promoting bilateral trade in the Indian rupee, India is reducing its dependence on the US Dollar and also given itself a greater reach over the global economy, and greater monetary stability. With all these changes India seems set to come out of the latest global economic crisis unscathed. The IMF has predicted that India will be one of the few countries to have a growth rate over 5% for the next few years, and its inflation rate is remarkably at a 16-month low. But what does this mean for the NIFTY 50 and the rest of the Indian stock markets. While the Indian economy increasingly enters the global spotlight, Indian stocks have also been slowly entering into investor’s portfolios.

For instance, the Indian consumer goods and healthcare industries have gained attention recently. Due to the increasing demand for healthcare products and the provision of affordable Sputnik Covid vaccinations in a post-pandemic climate, Dr. Reddy's Laboratories, an Indian pharmaceutical company, saw a rise in stock price of over 50% over the previous year. Similarly, Hindustan Unilever, a leading FMCG company, has seen its stock price rise by over 30% in the past year as a result of increased consumer spending in India.

The infrastructure in India has also advanced. As a result of the Indian government's emphasis on infrastructure development, businesses like Larsen & Toubro, a major infrastructure and engineering firm, have seen a surge in investment and growth. The increase in the stock price of the corporation over the previous year, which reflects India's expanding demand for infrastructure development, is above 80%. With massive projects like the Bharatmala Pariyojana roads project and the Delhi-Mumbai Industrial Corridor, India's infrastructure sector has been a top priority for the government. We may anticipate that the infrastructure industry will prosper as a result of these projects, which aim to enhance the existing transportation and communication infrastructure.

India's expanding IT sector and manufacturing sector are also boosting the economy of the nation. Due to their success in the international tech industry, Indian tech firms like Tata Consultancy Services and Infosys have seen a rise in the value of their stocks. Additionally, as businesses look to tap into the talent pool in the nation, India's highly educated populace is drawing more global investment.

It's crucial to remember that the Indian stock market is still very erratic, with sharp variations in stock values brought on by a variety of variables like alterations in governmental policy and world events. Investors should be aware of this volatility while purchasing Indian stocks.

In conclusion, the Indian stock market is full of surprises, with both ups and downs. However, with a growing manufacturing sector, expanding tech industry, and an increasingly educated population, the future looks bright for investors. As long as the government continues to cut through red tape and the country keeps churning out highly educated citizens, we can expect long run growth opportunities to arise from the Indian stock market. So, if you're looking to invest in emerging markets, don't miss out on the potential of India. As they say in Hindi, "acche din aane waale hai" – good times are coming!

By Sunay Challa - MCD Capital Senior Analyst

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