Saurabh Mukherjea: Japan 1970s, not USA 1970s, is the better guide to what lies ahead for India

Contrary to the fashionable view that the Indian stock market will crater alongside the American stock market (as the Federal Reserve pursues aggressive rate tightening), we believe that India is more likely to follow the trajectory of Japan in the 1970s. As oil prices rose 10x through the 1970s, the US stock market went nowhere whilst the Japanese stock market trebled. Leading Japanese companies – similar to our Consistent Compounders – delivered 20% per annum share price compounding in that pivotal decade for Japan.

“…a novel confluence of forces stands to transform India’s economy over the next decade, improving the lives of 1.4bn people and changing the balance of power in Asia. Technological leaps, the energy transition and geopolitical shifts are creating new opportunities—and new tools to fix intractable problems….

As the country emerges from the pandemic, however, a new pattern of growth is visible. It is unlike anything you have seen before…. These changes…help explain why India is forecast to be the world’s fastest-growing big economy in 2022 and why it has a chance of holding on to that title for years.” – The Economist, 13th May 2022 (source: https://www.economist.com/leaders/2022/05/13/the-indian-economy-is-being-rewired-the-opportunity-is-immense).

New challenges in an unlocked world

Over the last 12 months, as the world has emerged from Covid-19, various fiscal and monetary stimuli injected in 2020 – to the tune of…