Should You Invest in India in 2021?

India is one of the promising emerging economies in the world for investors. In 2020, when most Asian and emerging markets witnessed outflows, Indian equities received more than Rs 1.6 lakh crore ($23 billion) from foreign institutional investors, as per NSDL's data. In 2019, the inflow was $14.2 billion.

While India has the potential for strong growth, one of the reasons it has been attracting foreign capital inflows, of late, is the weakness in the US dollar index due to the COVID-19 outbreak. After the US Federal Reserve indicated that it will keep its interest rates lower for a longer time to support growth in the American economy, institutional investors looked at emerging markets to park their money in 2020 and are likely to continue to do so in 2021.

Growing with India

The continued interest of foreign investors in Indian companies has been clearly visible in the new peaks that Sensex and Nifty 50 have been breaching since the start of 2021 (Source: BSE and NSE respectively). Indian investors too can benefit from this rally by investing in the equity of companies listed on BSE and NSE, the two major stock exchanges of India.

The recent Economic Survey of India (2021), presented ahead of the Union Budget, said that the country is expected to see a 'V-shaped recovery' with GDP growth forecasted at 11% for the financial year 2021-22 on the back of nationwide vaccine drive to prevent the coronavirus outbreak.

A 'V-shaped recovery' is a quick and sustained recovery in measures of economic performance after a sharp economic decline.

Similar projections have been made by international rating agencies, enhancing confidence to invest in the Indian economy.

Where to invest?

Generally speaking, a country's stock market is considered a reflection of its economy. However, the movement in the Indian stock market is primarily driven by FII fund flows, which makes domestic investors rush to betting on stocks with higher FII stake to make good returns.

But, in the long run, it will be a tedious task for an ordinary retail investor to keep tracking investment trends when it comes to picking the right stocks. This is where expert mutual funds houses like Axis Mutual Fund come to play. The fund manager of the mutual fund products offered by these asset management companies will do the part of picking the right mix of Indian stocks that hold the potential to grow with the Indian economy and manage the risk of investing in stock markets for you.

Thus, by investing in equity mutual funds, you are able to bet on stable businesses handpicked by dedicated analysts, with the potential to make healthy returns that beat inflation and create wealth in the long-term.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.