India's economy keeps powering ahead

By Reuters
Updated: 10:14 EDT, 30 November 2009

India strengthened its reputation as one of the world's strongest emerging markets today by revealing annual growth of nearly 8%.

Ringing up the returns: Models at a recent mobile phone launch in booming India

India's economy grew by 7.9% in the quarter to the end of September compared with a year earlier, shattering forecasts of 6.3%.

Economists said it was largely down to stimulus measures that had boosted demand and bolstered manufacturing activity.

It will add pressure on the central bank to raise interest rates as inflation rises.

Manufacturing output expanded by 9.2% in July-September from a year earlier, while farm output grew by an annual 0.9%, government data showed.

Despite turmoil in Middle Eastern markets due to Dubai's debt woes, Indian shares rebounded 1.8% today - it had been 2.4% higher - as investors gave a thumbs up to the upbeat economic numbers.

It means India's Sensex 30-share main index ends November up 6.5%, erasing most of a 7.2% fall in October, which was its weakest monthly performance in 2009.

India's biggest car maker Tata Motors rose 5%, a beneficiary of 'cash for clunkers' schemes in Europe and the US, after the company reported a return to operating profit for its British Jaguar Land Rover division. Steel maker Tata Steel rose 5.6%, copper producer Sterlite Industries was up 3.4% and aluminium producer Hindalco climbed 4.1%.

China, which recently posted a GDP rise of 8.9%, are increasingly touted as the new hopes for the world economy. The credit crunch and recession has been most pronounced in Western economies, reinforcing the view that the so-called Brics economies - Brazil, Russia, India and China - will pick-up the pace.

As the planet's largest democracy and second most populated nation, with 1.2bn people, India is constantly changing and new themes are emerging all the time.

It has one of the youngest populations in the world, with about half aged below 26 and there are an increasing number of people using credit cards, buying mobile phones, eating out, shopping in big department stores and spending their money on healthcare, travel and luxuries. The middle class is now said to make up 200m people and this is expected to swell to 500m over the next eight years.

How can you invest in India?
Philip Scott, investment correspondent, This is Money

There is a limited selection of pure India funds but for some the growth has been exceptional. It is important to note that given the volatility of the region, investors should not be over-exposed in their portfolio. India has a very good long-term story, but this is for high risk investors only. When a market can shoot up so quickly, it can also come down just as fast, if not faster.

Specialist India funds

Fund commonly recommended by financial advisers include Jupiter India, and Neptune India.

Other portfolios worth a look include the HSBC GIF Indian Equity fund and Fidelity India Focus. The JPMorgan Indian Investment Trust, is another option, while Lyxor offer investors an India exchange traded fund (ETF) - Lyxor ETF INDIA.

• GUIDE: Everything you need to know about investing in India

• Buy India funds at a deep discount

• Buy and sell ETFs for a flat fee of £12.50

Emerging market funds

Another way in is to buy a generalist emerging markets fund which invests in a spread of regions. Often recommended funds include Allianz RCM Bric Stars, which invests predominantly in Brazil, Russia, India and China. There is also the iShares FTSE Bric 50, an ETF offering exposure to the same regions.

Other often recommended generalist emerging market portfolios with good exposure to the Indian market are First State Global Emerging Markets Leaders, Baillie Gifford Emerging Markets and JPMorgan Emerging Markets for investors who prefer this route.

• Buy India funds at a deep discount

• Buy and sell ETFs for a flat fee of £12.50