Sam Dickie: Fisher Funds expert on the benefits and drawbacks in investing in the Indian economy

The Indian stock market is catching the attention of investors - and experts are claiming there's plenty of potential.

The economy is also attracting positive attention - but one expert is warning there's a notable Achilles heel.

Sam Dickie from Fisher Funds explains further.

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Episode Transcript

Speaker 1 (00:00):
Brian Bridge.

Speaker 2 (00:01):
India's economy India, that is, its economy is massive. GDP
is four point three trillion dollars in twenty fifteen it
was two point one. That means it's doubled in ten years,
growing six point eight percent this year. That's what they're expecting.
Huge potential for exporters, for investors too. They've got a
stock market there, but it does have an Achilles heel

(00:24):
and investors should know about it. Sam Dicky Fisher funds
with US Tonight, Hey, Sam, good evening. Ryan. First of all,
it is a pretty impressive beast the Indian economy, isn't it.
I mean, just the trajectory that it's on.

Speaker 1 (00:37):
It is a miracle. It's not just the sheer size
of it and almost one and half bidding people, but
it's the youth and vibrancy of that population. So the
median age in India is around twenty eight years of
age versus almost forty in the US and New Zealand.
So the world's largest youth population is entering their prime

(00:58):
earning years. And it's got act says to critical natural
resources like iron ore to make steel and abundant coal
to power the growth, plus the fact that it's a
democracy and is another country almost the same size it
isn't it a democracy? And that has combined to double
GDP in the last decade, which is miles faster than
most countries on Earth.

Speaker 2 (01:18):
So what about the stock market and in the what's it?
I mean, we don't talk about it a lot here.
What's it like?

Speaker 1 (01:25):
It is very vibrant. So I'll just give you a
couple of numbers there, Ryan. The overall value of the
stock market is more than one hundred percent of the
size of the economy, so more than one hundred percent
of GDP. And that is similar to very developed stock
markets like the US and Australia. And the retail investor
over there is very active, so mum and dad, they
love it. Fifty percent of trading volume is driven by

(01:46):
these retail investors versus more like twenty percent in the US.
And they're super tech savvy as well, so eighty two
percent of all stock market trades are done via mobile apps,
miles ahead of most Western stock markets.

Speaker 2 (01:58):
Wow, what's the risks?

Speaker 1 (02:02):
There's always risks. So the Achilles' heel for India is
two fold. The first one is with tiger growth that's
sort of eight percent growth they've been achieving can come
tiger inflation, and in fact it can all be kickstarted
by oil. So India needs to import around half of
its energy needs and that can feed on itself.

Speaker 2 (02:20):
So think about this.

Speaker 1 (02:21):
As the oil price goes up in US dollars, that
drives up domestic Indian inflation, which in turn weakens the
currency or the Indian rupee, which in turn makes the
imported oil more expensive and roupee terms and so on
and so forth, so it feeds on itself. It's otherwise
known as the oil inflation currency trap of India and
the second Archilles heel is. And this is a little

(02:42):
bit of motive, but it's called the educated unemployed time bomb.
So twenty nine percent of graduates unemployed, which is nine
times higher than the uneducated unemployment right right, And when
you think about twelve million youths a year graduating and
entering the labor market, and a lot of them want
to be computer engineers, and considering AI can code faster

(03:05):
than any trainee computer engineer, it's a problem. And all
of this is supercharged by the exceptional inequality in India.
So an unusually tiny proportion of people hold the vast
majority of wealth.

Speaker 2 (03:17):
Yeah, even that GDP number, you know, it sounds so
massive and impressive, but in terms of GDP per capita,
they're like one hundred and fiftieth in the world, aren't they.
I mean, you've got to remember just how big the
population is in relation to that, right, That's right.

Speaker 1 (03:31):
And the penetration of things like consumer banking and things
are very low, so is a long way to go,
but they're moving pretty rapidly. So I think they're probably
the fifth biggest economy in the world today and by
twenty fifty expected to be the biggest economy. So they
are on the charge.

Speaker 2 (03:47):
Now where does what does all of this mean for investors?

Speaker 1 (03:51):
Well, the amazing thing about economies like India that are
starting from behind the Western world is with modern day technology,
they can actually leap frog the West because these young,
vibrant consumers are hungry for information and tech savvy. So
you've got high internet and mobile usage, you've got cashless payments.
Think how recently we went to cashless payments, cashless payments

(04:13):
and very very remote villages in India all creating the
world's largest digital public infrastructure and overall some phenomenal companies
in India, and it is a tiger economy that grows rapidly,
but just watch those Archilles heels. So, for example, if
if you are invested in India and you started to
see the oil price shoot up, keep an eye on

(04:33):
the Indian rupee for signs of abnormal weakness and that
can drive down.

Speaker 2 (04:37):
The stock market. Fascinating stuff. Sam, Thank you very much
for that update. We've been talking a lot about in
there in the last couple of months, so it's good
to get an insight into their stock market too. Sam
Dickey Fisher Funds. For more from Hither Duplessy Allen Drive.
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