India, a land of stock market opportunity?
In Part 1, we explored India's macroeconomic situation and examined why it represents an investment opportunity for investors. In this second part, we present some investment ideas for taking advantage of the Indian market boom.
➡️ Part 1: India, a land of stock market opportunity? ⬅️
The Indian stock market
Companies listed on Indian stock exchanges include giants such as Reliance Industries, Tata Consultancy Services, HDFC Bank and Infosys. The Indian economy is marked by the predominance of certain sectors, such as information technology, financial services, consumer goods and infrastructure. The Indian stock market currently comprises 4984 companies. India has 119 companies with a market capitalization of over $10 billion as of July 24, 2024, including 13 with a market capitalization of over $50 billion.
The sector breakdown (weighted capitalization) of the entire Indian market is as follows:
The financial sector, with 22.2% of total gross capitalization, is over-represented. Technology follows at 13.5%, ahead of industry (12.9%) and basic materials (11.3%). Healthcare and real estate are largely under-represented.
As for Indian indices, here are just a few:
- S&P BSE Sensex 30 : Comprising the 30 largest companies listed on the BSE, this is the Bombay Stock Exchange's flagship index.
- Nifty 50 : Comprising the 50 largest companies listed on the NSE, this is the benchmark index for the national stock exchange.
- MSCI India: the index comprises 146 Indian companies, covering around 85% of the local stock market universe.
- The BSE and Nifty indexes are broken down by capitalization size, as is the practice elsewhere. The Nifty Midcap 100 , for example, tracks the country's mid caps.
Investing in India
Before presenting a few high-potential Indian companies, investors should bear in mind that this market is not easily accessible to foreigners. In fact, as an individual investor, you cannot trade directly in Indian shares, unless you are wealthy enough to qualify for the special status of FPI (Foreign Individual Investor), which requires you to go through approved intermediaries and comply with investment ceilings.
The best way to access the Indian market is surely through ETFs. Here are a few examples:
- iShares MSCI India UCITS ETF: this is the major index fund marketed in Europe by iShares to track the Indian market. Assets under management ($5.68 billion at the time of writing) far exceed any of the others. It is dollar-denominated, accumulation-based and physically replicates the MSCI India index in full (146 positions). Fees are 0.65%.
- Franklin FTSE India UCITS ETF: this index fund tracks the FTSE India 30/18 Capped Index, which comprises 232 companies. Its net assets are narrower than those of its counterpart ($998m). Replication is total. Its main advantages are a fee of 0.19% and a broader range of companies.
Another roundabout way is to invest in Indian companies listed in the USA via an ADR (American Depositary Receipt) system.ADRs (American Depositary Receipts), which are negotiable securities issued by a bank representing shares in a non-American company. These include companies such as Infosys, Tata Motors, Wipro, HDFC Bank and ICICI Bank.
Some interesting Indian companies
From the entire Indian stock market (almost 5,000 listed companies), I have selected around ten companies with a market capitalization in excess of 5 billion, which have particularly solid fundamentals, a good track record in terms of operational management and good growth prospects ahead of them.
Bharat Electronics is an Indian company specializing in the manufacture and supply of electronic equipment and systems for the defense sector and civil markets. Based in Bangalore, BEL develops products for the army, navy and air force, including radar, fire control, communications, electronic warfare and strategic components. Its business model is based primarily on the production of defense systems, which account for 88.32% of its revenues. Services, including electronics manufacturing and cybersecurity, contribute 9.82%. Non-military products, such as electronic voting machines and healthcare solutions, round out its offering. BEL generates 100% of its sales in India. The company employs 11,458 people and boasts strong profitability and a solid financial position, despite a high valuation.
Tata Elxsi specializes in design and engineering services. Founded in 1989, it is part of the Tata Group, a leading Indian conglomerate. Tata Elxsi focuses on three main business segments: automotive, media and entertainment, and healthcare. The company offers product design, embedded software development, and test and validation solutions. It helps its customers develop innovative products and enhance the user experience through advanced technologies such as artificial intelligence, the Internet of Things (IoT) and augmented/virtual reality. Tata Elxsi's business model is based on the provision of end-to-end services, from initial design to implementation and technical support. The company works closely with its customers to understand their specific needs and develop tailor-made solutions. In terms of revenue breakdown, the automotive sector accounts for a significant share, followed by media and entertainment, and healthcare. Tata Elxsi works with automakers to develop advanced driver assistance systems (ADAS), connectivity solutions and user interfaces. In media and entertainment, the company provides software design and development services for broadcast platforms and connected devices. Finally, in healthcare, Tata Elxsi offers solutions for medical devices and care management systems. Its business model, based on innovation and collaboration with customers, has enabled it to maintain a leading position in the Indian and international markets.
Persistent Systems is a company specializing in software products and technology services. Based in Pune, it operates mainly in the banking, financial services and insurance (BFSI), healthcare and life sciences, software, high-tech and emerging industries sectors. The company offers a range of services including digital strategy and design, software product engineering, customer experience (CX) transformation, cloud and infrastructure, intelligent automation, IT security, enterprise integration, application development and management, data and analytics, and persistent AI. Persistent Systems' revenue breakdown is dominated by the software, high-tech and emerging industries (46.78%), followed by the BFSI sector (31.96%) and healthcare and life sciences (21.26%). Geographically, North America represents 78.49% of revenues, India 9.92%, and the rest of the world 11.59%. With a market capitalization of INR 585,330 million in 2024, Persistent Systems is showing solid growth, supported by a strategy of acquisitions and strategic partnerships, particularly in the fields of AI and cloud. The company employs around 21,950 people and continues to position itself as a key player in the IT services and consulting sector.
TVS Motor Company is a major player in the two- and three-wheel vehicle sector in India. Headquartered in Chennai, the company is distinguished by its commitment to sustainable mobility, with four production sites in India and Indonesia. TVS Motor produces a wide range of vehicles, including motorcycles, scooters, mopeds and electric vehicles. Its flagship models include the TVS Apache, Ronin and Raider series, and the TVS iQube and TVS X electric scooters. The company also offers financial services and spare parts. TVS Motor's revenue breakdown shows that 84.28% comes from vehicles and parts, 14.78% from financial services, and 0.93% from automotive components. All sales are made in India. With a strongly growing market capitalization, TVS Motor continues to innovate and expand its offering, particularly in the electric vehicle segment, while maintaining a solid financial performance.
Based in Ahmedabad, Astral Ltd specializes in the manufacture of chlorinated polyvinyl chloride (CPVC) pipes and fittings. Astral Limited operates in several segments, including plumbing, paints and adhesives, water tanks, construction chemicals, sealants, infrastructure, valves and sanitary ware. Astral's business model is based on product diversification. In the plumbing sector, the company offers plumbing systems, drainage systems, cable protection systems, agricultural systems and solvent-based adhesives. For water tanks, it offers rotomolded, blown and storage tanks. In the infrastructure sector, Astral offers drainage and cable protection systems. In taps and sanitaryware, it markets faucets, sanitaryware, cisterns, showers and bathroom accessories. Finally, in the paint sector, the company offers protective, industrial and decorative coatings. Astral's revenue breakdown is dominated by the plumbing sector, which accounts for 73.03% of sales. Paints and adhesives account for 26.97%. Geographically, 92.5% of revenues come from India, while 7.5% are generated internationally. Astral Limited is characterized by strong growth and a solid financial position, although its valuation is considered high in relation to its tangible assets. The company is headed by Sandeep Pravinbhai Engineer, with Hiranand A. Savlani as CFO. Astral continues to expand its production capacities and innovate in its market segments to maintain its leading position.
Founded in 1892, Britannia Industries is one of India's leading food manufacturers. Its head office is located in Bangalore. It specializes in the production and distribution of food products, including cookies, dairy products, cakes, breads and snacks. The company is renowned for its iconic brands such as Good Day, Tiger, NutriChoice, Milk Bikis and Marie Gold. Britannia's business model is based on a wide range of quality food products, a strong presence in the Indian market and extensive distribution. The company uses innovative marketing strategies and advertising campaigns to build brand awareness. Britannia also invests in research and development to innovate and respond to changing consumer tastes. Britannia Industries generates the majority of its revenues from the sale of cookies, which account for around 75% of its total sales. Dairy products, including milk, yoghurt and cheese, contribute around 15% of revenues. Other segments, such as cakes, breads and snacks, account for the remaining 10%. Britannia Industries continues to dominate the Indian food market thanks to its diversified range, strong brand presence and extensive distribution network. The company remains well positioned to capitalize on the growth of the food sector in India, while exploring opportunities for international expansion.
PI Industries is an Indian company specializing in the manufacture and distribution of agrochemical and pharmaceutical products. Based in Udaipur, it operates mainly in two segments: agrochemicals and pharmaceuticals. The agrochemical segment includes exports of agricultural chemicals (CSM) and domestic agricultural brands. The pharmaceutical segment covers contract research and development, as well as the manufacture of active products and intermediates for the pharmaceutical industry. PI Industries' business model is based on research and development, contract manufacturing (CSM) and distribution. The company offers R&D services, including target discovery, molecule design and lead optimization. It also markets products such as Shield fungicide and Londax Power herbicide. In terms of revenue breakdown, 78.31% comes from active ingredients and intermediates, 20.54% from formulations, and 1.15% from other activities. Geographically, 41.53% of sales are generated in North America, 23.28% in India, 21.62% in Asia, 9.21% in Europe and 4.37% in the rest of the world. PI Industries is distinguished by a strong capacity for innovation and a solid financial performance, with high margins and a robust financial position. However, the company is highly valued, which may represent a risk for investors.
Titan Company is an Indian company specializing in the design, manufacture and marketing of watches, jewelry, eyewear and fashion accessories. Based in Bangalore, Titan Company is a major player in the cyclical consumer goods sector, more specifically in jewelry and accessories. Titan's sales can be broken down as follows: - Jewelry (88.5%): gold jewelry adorned with diamonds and precious stones, as well as pure gold and platinum jewelry, marketed under the Tanishq, Zoya, Mia, Carat Lane and Gold Plus brands. - Watches (7.3%): sold under own brands (Titan, Fastrack, Sonata, Favre Leuba, Xylys and Nebula) and licenses (Tommy Hilfiger, Police, FCUK, Annie Klein, Kenneth Cole and Esprit). - Eyewear (1.7%): prescription glasses, sunglasses, frames, lenses and contact lenses under the Titan Eye Plus, Titan, Fastrack and Glares brands. - Other (2.5%): distribution of perfumes (Skinn by Titan), saris (Taneira Sarees) and fashion accessories, as well as manufacture of precision engineering products and industrial machinery. Titan Company Limited markets its products via a network of 1,909 exclusive stores in India, over 7,000 multi-brand outlets and online platforms. At the end of March 2021, the company had 11 production sites in India, generating 99.5% of its sales on the Indian market. Titan stands out for its broad product range and strong presence on the Indian market, making it a leader in the jewelry and accessories sector.
Pidilite Industries is a major player in the basic materials sector, more specifically in diversified chemicals. Headquartered in Mumbai, the company specializes in the manufacture of adhesives, sealants, construction chemicals, and products for DIY and craftsmen. Pidilite's business model is based on two main segments: Consumer and Bazaar (C&B) and Business to Business (B2B). The C&B segment, which accounts for 80.05% of revenues, targets end consumers such as carpenters, painters, plumbers, households and students. The B2B segment, representing 19.45% of revenues, supplies industrial products such as adhesives and synthetic resins to various industries such as packaging, textiles and leather. The geographical breakdown of revenues shows a strong concentration in India (88.33%), with an international share of 11.67%. Pidilite stands out for its capacity for innovation and its commitment to quality, enabling it to maintain a leading position in the Indian specialty chemicals market.
Schaeffler India is an automotive and industrial equipment supplier. Based in Vadodara, the company supplies components and systems for engines, transmissions and chassis for hybrid, electric and combustion engine vehicles. Its activities are divided into four segments: automotive technologies, automotive aftermarket, industry and exports. The automotive technologies segment develops durable products for a variety of vehicles, while the aftermarket segment offers ready-to-use solutions for transmission, engine and chassis systems. The industrial segment offers a range of large, high-precision bearings. Finally, the "Exports and others" segment includes international and scrap sales. In terms of revenue breakdown, 78.77% comes from mobility components and related solutions, and 21.23% from other activities. Geographically, 86.79% of sales are generated in India and 13.21% internationally. Schaeffler India employs 2,858 people and is headed by CEO Harsha Kadam.
