The global equities rout singed Indian shares over the past week but the tumble has tilted the risk-reward scenario firmly in New Delhi’s favour, providing smart investors an opportunity to gobble up bargain buys in an economy that is set to benefit from China’s slowdown and financial travails.

Investors, especially large funds in the developed world, are looking to India as a potential candidate for investment because of the massive domestic market it possesses and relatively negligible exposure to China. Additionally, the fall in Beijing’s manufacturing activity has triggered a collapse in world commodity prices, which should help a net importer like New Delhi.

“For us, lower commodity prices and lower oil prices are a boom,” Finance Minister Arun Jaitley told BBC this week. “It is an opportunity and a challenge to Indian politics — if we can continue to reform at a faster pace and really attract global investment, then our ability to provide that shoulder which the world economy needs will be much greater.”

India is on track to top the global growth table for major economies this year, according to the World Bank and the International Monetary Fund, and the expansion should pick up steam in the next year as investment in large projects such as roads, railways, power facilities and smart cities takes off.

With 1.2 billion people and a growing middle class that is more than the population of the United States, the country’s domestic market is huge. So, demand for everything from luxury goods to consumer durables and cars and electronic items are set to rise. Many global brands are now available in glitzy malls where footfalls are on the rise.

Domestic market

India had the third-highest population of super-rich in Asia, behind Japan and China, as the number of people with net assets of $30 million (Dh110.15 million) rose 9.5 per cent to 8,595 last year, according to the Wealth-X and UBS World Ultra Wealth Report 2014.

This week, shrugging off the wobbly stock market and depreciating rupee, Italy’s Ferrari announced that it will open two new dealerships, in Mumbai and New Delhi, this year, returning to the country after an earlier entry had stalled. It will be offering the two-door, four-seat California T convertible starting at more than $500,000.

The luxury car-maker will be taking on in India rivals such as Aston Martin, Fiat Chrysler’s Maserati and Volkswagen Lamborghini.

On Friday, Canada’s Brookfield Asset Management, which manages more than $200 billion, bought six road and three power projects from Gammon Infrastructure Projects Ltd, making a significant foray into India’s infrastructure sector.

“This transaction represents Brookfield’s first major investment in Indian infrastructure, and provides us a great platform to participate in the Indian growth story over the long term,” Anuj Ranjan, managing partner at Brookfield, said in a statement.

Brookfield and Core Infrastructure India Fund Pte Ltd, a private equity controlled by Kotak Mahindra, clinched the deal as a consortium. The sale will allow Gammon, a medium-sized infrastructure firm majority owned by Gammon India Ltd, to cut its consolidated debt to Rs22.3 billion from Rs39.5 billion.

Stocks pares losses

The top-30 Sensex, which plummeted 5.9 per cent on Monday – the most in more than 6-1/2 years – recouped some of the losses in the tumultuous week and closed on Friday at 26,392.38, with a weekly drop of 3.6 per cent.

“Thanks to the Chinese crisis, the valuation comfort has come back to the Indian markets,” Harsha Upadhyaya, chief investment officer for equities at Kotak Mahindra Asset Management Co, which has $7.3 billion in assets, told Bloomberg TV. “This is the right time to invest.”

He recommended automakers and cement producers.

With foreign funds withdrawing about $2.5 billion from equities so far in August, the outflows are expected to be the worst since October 2008. The widely tracked Sensex is likely to post its biggest monthly drop in more than three years, with only one trading day left for the month.

However, it is the fall in share prices that should make the market an attractive proposition for new funds to accumulate stocks. The drop in the rupee’s value against the dollar would further make it cheaper for foreign investors to buy shares.

Against the backdrop of slowing China and its impact on the world economy – the main factor behind the stocks slump – there is a silver line for India.

“India hasn’t been rattled as badly as Brazil, Russia or South Africa. Its international reserves are ample, and it isn’t highly dependent on foreign capital to fund imports,” the Wall Street Journal said in a report.

“It also doesn’t rely on exporting resources, which means ebbing Chinese demand for minerals and metals isn’t serious. And it doesn’t have many companies competing head-to-head in third markets against the Chinese exporters that benefit from a weaker yuan.”

The tremors unleashed by Beijing’s abrupt currency devaluation and its frantic efforts to steady the ship by dumping US Treasury notes have caused heartburn among world economies. The repercussions could be felt in the US too, affecting growth over the medium term.

Doubts have already risen about whether the US Federal Reserve would go ahead with a much expected rate increase in September.

“It’s early to tell,” Fed Vice-Chairman Stanley Fischer told CNBC. “We’re still watching how it unfolds.”

The equities sell-off even as US economic data remained robust underscores the gathering darkened clouds. Some decision-makers believe it would be unwise to change monetary policy in the midst of a storm, suggesting that the weeks in the run up to the Fed policy meet on September 16-17 would be crucial for the much anticipated “lift-off” in rates.

There is a chance of the US rate rise being put off to December which, if it happens, would be beneficial to India and enable more foreign fund investment.

On the other hand, the Reserve Bank of India is widely expected to reduce interest rates in September to support growth as inflation remains muted. For companies and the stock markets, this would be a positive sign as lower rates would bolster demand and pave the way for higher returns.

(The writer is a journalist based in India)