3 minutes to read by  RBC Asian Equity team Jan 4, 2024

We’re proud to present the second piece in our ‘Asian takeaways’ series, where we’ll share local insights on what’s happening across Asia-Pacific. From India to Indonesia, from Taiwan to Thailand, we give our views on the dynamic changes across the region, while showcasing our learnings from being ‘on the ground’ at company and site visits.

India has been in the news this year, with the Cricket World Cup putting the country in the limelight and national election talk gaining momentum. Prime Minister Narendra Modi is hoping for re-election in April 2024, and investors are also looking towards the coming year and pondering what could be in store for India’s stock market.

One of the key questions is whether a reversal in terms of India and China’s performance relative to each other can be expected. The consensus seems to be that China is on track for a potential value rally in early 2024, in contrast to India’s historically high valuations across most, if not all, sectors. However, our view is that this consensus oversimplifies the outlook for these two countries.

In our piece we discuss India’s position relative to China in more depth. We also share our thoughts on many aspects of India’s evolution, including:

• India’s digital transformation, with businesses of all sizes adopting modern technology. This was evidenced in Mumbai where credit card machines have replaced cash payments and even street food stands are accepting digital payments via QR codes.

• Our visit to the ‘Gateway of South India’, Chennai, where industrial parks play host to both Indian and multinational businesses and are situated within special economic zones, improving the overall ease of doing business.

• The success of Modi’s ‘Make in India’ initiative, with manufacturing industries growing fast and the country continuing to establish itself as a frontrunner in the ‘China +1’ model.

We believe that prospects are looking bright for India. Whilst present valuations are unsupportive and over the near term there is a strong likelihood of India underperforming China in the lead up to the elections (especially if China welcomes renewed interest following a difficult 2023), a decade of improvements in taxation frameworks, legislation and policy means that the country is in a strong position to reap future rewards.

It is likely that political stability will add succour to the long-term optimism, but even a surprise loss would not derail continued strong performance over the medium to long term, in our opinion.

India’s market depth and supportive policy environment leads us to believe that the country still has much to offer.

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