07:01:00 | 06 April 2010
Jupiter India manager Avinash Vazirani believes the Indian growth story can continue for at least the next 20 to 25 years.
Speaking at Citywire’s Wealth Management forum, Vazirani said: ‘The Indian story is about growth. There has been fantastic GDP growth over the past few years. In March 2009 it dipped down to just over 6%. This year we are expecting 7% and 8.5% over the next few years. Much more importantly, in my view this growth is set to continue for at least the next 20 to 25 years.’
Underleveraged consumers and companies support Vazirani’s growth expectations and he is keen to highlight Goldman Sachs’ latest Bric (Brazil, Russia, India and China) report. The bank’s initial growth forecasts have been surpassed and as a result they argue that India’s GDP could be greater than that of the US by 2042.
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‘Rural India – that is where the growth is coming from. Rural India already has as many high earners as urban India. The growth over the past five to six years – which has been powered by demographics, essentially the result of a baby boom in the 1980s – has come so far from urban India, but rural India is still growing,’ Vazirani said.
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Vazirani is particularly encouraged by a significant amount of rural India’s population moving into the middle income bracket. While urban India has a mobile phone penetration of almost 100%, he compares this with just 10% in rural India, concluding that there is ‘a long way to go’ in terms of consumption growth in this area.
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His outlook for equity markets also remains positive on the back of a deep local market, supported by domestic investors.
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He added: ‘India, like other markets around the world, is not as cheap as it was 12 months ago. It is in the fair-value range. Everyone I speak to, including global emerging markets fund managers, believes India is expensive.
‘India is expensive and it always has been. Why? If you look at the return on equity (ROE) gap, if there is a continual difference between the ROE of Indian companies and others – of course it will be expensive. Why is the ROE in India higher? My view is because of the entrepreneurs running the companies.’
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Jupiter?s Vazirani predicts 25 years of growth in India | Fund Selector | Citywire
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