Raw Material Stocks: How India is Now Providing New Hope

Last Updated: 6. Dezember 2023By

While economies in Europe and North America are currently deep in crisis and China is far from its old growth records, there is a ray of hope for the global economy. You can probably guess it: It’s about India.

According to a UN report published in April, India, with its population of 1.42 billion, is now the most populous country in the world, giving the emerging country enormous influence on the global economy.

At the same time, despite all macroeconomic challenges, India’s economy is very strong in terms of growth – which is also relevant to you as a commodity investor. But first: A few days ago, the Indian government released official economic data that once again underline the strength of the subcontinent.

India’s economy is thriving According to the data, India’s economy grew by a whopping 7.6 percent in the third quarter, stronger than most analysts had expected. The country in South Asia is thus one of the fastest growing major economies in the world. By comparison, China’s economy grew by „only“ 4.9 percent in the same period, while in Germany it even went slightly down.

The construction sector was particularly strong. This grew year-on-year between July and the end of September by an impressive 13.3 percent, after +7.9 percent in the previous quarter. Here too, the mega-state exceeded expectations.

Why the construction industry is booming Background: India’s construction industry had been in trouble, especially due to the coronavirus pandemic. Last year, however, the sector began to make a remarkable recovery, which resulted in a boom in 2023. Driven by increasing prosperity (more investment room for consumers and companies) and the drastic shortage of housing in major cities combined with population growth.

According to the government in New Delhi, there had been a total of 19 million housing units lacking in 2022. A problem that is likely to continue and further fuel India’s construction boom. According to Reuters news agency, experts expect the boom to last for some years. According to Reuters, this is only the beginning of a growth cycle in housing construction.

Also interesting: According to Anarock, many Indians currently want to move to larger apartments or houses. This underscores the increasing prosperity and its demands on the construction industry. The beneficiaries include Indian construction or real estate stocks such as Prestige Estates Projects and Godrej Properties, which had already gained significantly in the last few months.

Good news for commodity investors But India’s strength, especially in the construction sector, is also a positive signal for you as a commodity investor. Because while other countries stumble, India can act as a demand compensator for important raw materials.

This could stabilize or even increase market prices in the long run. Positive effects can be expected, among other things, for industrial metals such as copper, aluminum, zinc and tin as well as especially for specialized building materials such as steel (iron ore), cement and sand.

My conclusion for you Most of the important raw materials today are heavily dependent on the global economy. If it works badly, the demand for the materials and therefore usually also their price drops.

As an investor, you should therefore pay very close attention to the development of the major economies in particular – but not only keep an eye on the „classics“ such as Europe, North America or China, but now also India. In fact, the mega-state is currently the most dynamic growth nation in the world.

Thus, growth is likely to continue steeply in the coming years. Here lie strong return potentials for the raw materials industry.