India number 1 emerging market to invest in, say 85 sovereign wealth funds and 57 central banks
By Team Newsable | First Published Jul 10, 2023, 3:24 PM ISTThe study highlights India's rise as a top investment destination for sovereign investors. With solid demographics, political stability, and proactive regulation, India presents attractive opportunities in both public and private markets. The study also showcases India's favourable investor-friendly environment
Emerging markets such as India, with solid demographics, political stability, and proactive regulation, have become prime investment destinations, the Invesco Global Sovereign Asset Management Study has said. The study, initiated in 2013, gathers insights from 142 chief investment officers, heads of asset classes, and senior portfolio strategists from 85 sovereign wealth funds and 57 central banks.
The eleventh annual study on sovereign investors emphasizes that emerging markets present attractive investment opportunities in both public and private markets. Investors are particularly interested in economies that offer favourable demographics, political stability, and positive regulatory initiatives, with India being a top priority.
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The study highlights India as an exemplification of the qualities sought by sovereign investors. It notes that India is increasingly viewed positively for its improved business and political stability, favourable demographics, regulatory initiatives, and welcoming environment for sovereign investors. In fact, India has surpassed China as the most attractive emerging market for investing in emerging market debt.
A Middle Eastern-based development sovereign expressed a need for increased exposure to India and China, noting that India currently offers a more promising story in terms of business and political stability. The country's rapid demographic growth, presence of interesting companies, favourable regulatory initiatives, and investor-friendly environment contribute to its appeal to sovereign investors.
The report also mentions that India, along with countries like Mexico and Brazil, is benefiting from increased foreign corporate investment, driven by both domestic and international demand through concepts like "friend-shoring" and "near-shoring." This inflow of investment aids in funding current account deficits, supporting currencies, and boosting domestic assets, including debt.
Furthermore, expectations of peaking inflation and the completion of the tightening cycle in emerging markets play a role in this investment trend. Several emerging markets, including Brazil, are anticipated to overcome inflation and transition from tightening to easing monetary policies.
Additionally, commodity-rich countries like Brazil and Indonesia are seen as well-positioned for the green transition and the electric vehicle revolution. Consequently, they offer potential diversification opportunities for sovereigns with concentrated commodity revenue streams.
India, along with South Korea, remains one of the most attractive destinations for increasing investment exposure. A Western-based central bank mentioned its intention to expand exposure to emerging markets debt, with a particular focus on debt targeting real estate, infrastructure, and other diversified industries.
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