Is India the beneficiary from Russia-China concerns?

Since Covid-19, Australia’s relationship with China has all but soured, with trade relations between the two countries grinding to a halt, except for iron ore. And yes, a sad state of affairs indeed. Many Australian companies with business operations in or exporting to China were hit hard. But as the old adage goes, “as one door closes, another opens.”

And that opening is India.

Usually, investors have kept well clear of India, simply because of the red tape and obscurity. The Indian economy had become a basket-case riddled with corruption, bogged down by politics, often steered by a lack of basic economic knowledge, and was heavily tilted towards safe assets such as gold. It lacked capital and found itself in the ‘too hard’ basket. 

However, the thematic is changing and India is back. Investors are actively moving their funds across from China hoping to catch the upside of a fast-growing economy which clocked an 8.4% increase in GDP for the recent quarter. However, as Kanish Chugh, head of distribution at ETF Securities, puts it, “as geopolitical tensions with China escalate, and as India’s share market continues to outperform, Australians are starting to consider investing in India in its own right.”

The team at ETF Securities has put together a list of five of India’s most influential businesses, which are also included in the ETFs-NAM India Nifty 50 ETF (ASX: NDIA).

• HDFC Bank (NSE: HDFCBANK)

HDFC Bank has one aim, and that is to bring banking to every Indian. Through its journey, the bank has built partnerships, installed bank branches and made basic banking services available to everyone. This caused a knock-on effect; the government could begin paying welfare into bank accounts, which in turn started to grow savings.

• (NSE: RELIANCE)

Reliance is a market darling and is the top stock in the Nifty 50 Index; the company has its hands in almost everything. It has three main businesses: fossil fuels, retail and tech. At present, most of its profit comes from oil but the firm is aiming to move beyond fossil fuels as the world decarbonises.

• Tata Motors (NSE: TATAMOTORS)

Tata Motors is a big conglomerate that isn’t so well-known yet, it owns and makes two of the most iconic brands in automotive history. After suffering a volatile past, Tata committed to developing Jaguars and Land Rovers so that they’re all-electric by 2025. That’s a more aggressive stance that its competitors, but Chugh says, “it currently has 80% market share for electric vehicles (EVs) within India. As EVs represent just 1% of Indian passenger cars, the runway for growth is long. This growth arc is reinforced by government subsidies. Both the central and state governments of India have brought-in tax subsidies for EVs.”

• Hindustan Unilever (NSE: HINDUNILVR)

The Anglo-Dutch giant holds a long list of household brands which include detergent Jif, Cornetto ice cream, Dove soap, Rexona deodorant, and Vaseline. Back in the 1950s, the law required the local subsidiaries of foreign corporations to list locally. (Pfizer, Nestle, Sanofi are also separately listed in India). The separation has benefited Indians as Hindustan Unilever has strongly outperformed its London-listed parent. As Indians become wealthier and buy more westernised goods, Hindustan’s share price is sure to follow.

• Infosys (NSE: INFY)

Infosys is India’s blue-chip IT outsourcing company. Chugh says, “Infosys’ bread and butter is outsourcing and building IT systems for big companies. The world’s largest companies – like JP Morgan, Allianz, J&J – usually have vast IT requirements. They need sprawling computer systems to keep their companies running. Big organisations rarely build tech systems themselves. Instead, they bring in outside specialists like Infosys to build it for them.” Covid has helped the company by forcing everyone to work from home and in the cloud.

And there you have it, ETF Securities’ five hand-picked Indian stocks that have a bright road ahead.

Ishan Dan

Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.