As so often happens throughout the turbulent history of the markets, just when sentiment reached its peak reality swung back the other way. The BRICs, a "sure-bet" on above-trend growth back in 2007, have been among the most disappointing investments in the world since then.
After a breathtaking plunge of over 70% in 2008, India and China represent the backbone of an emerging market trade that has gone nowhere while parts of the developed world have ascended to new heights. With India's new pro-business government, things might be improving for investors, which is why exchange-traded funds of Indian companies may be the way to play this development.
India's GDP has nearly doubled since 2007. While the rate of growth is slowing, it will likely continue to grow between 4% and 5% this year and next. Come 2020, the country is expected to be among the fastest growing economies in the world.
One thing that always separated India from China -- vastly superior demographics -- will still be in place. A decade from now, this will be the world's most populous country in the world. It's also one of the world's youngest countries in terms of median age.
Why have investors avoided India for so long?
The answer is twofold. On the one hand, investors in the post-2008 world are simply unwilling to take risk. The preference for quality, particularly domestic quality, has reached almost unseen heights. On the other, India has had some legitimate economic turbulence in the last few years as adjusts to a lower growth rate. The market has flattened out in response.
Within the last few months this trend of stagnation finally seems to be changing. The Sensex market has broken out to new highs, up a mind-boggling 25% since March. A lot of that has to do with the polarizing new Prime Minister, Nahendra Modi. While his social perspectives have enraged liberal secularists, the markets are buying in to his pro-business, infrastructure-oriented economic agenda.