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Last 'BRIC' standing: Why analysts like India now

Overall, emerging markets have taken a beating so far in 2014, but analysts are pointing to one so-called BRIC market as especially attractive: India.

Analysts who watch the BRIC markets—Brazil, Russia, India and China—say India's near-term future is promising. India's equity market is up 6 percent this year, while the emerging market index is down about a percent in the same period.

Workers at a construction site below an elevated track, operated by Rapid MetroRail Gurgaon, in Gurgaon, India, in March 2014.
Kuni Takahashi | Bloomberg | Getty Images
Workers at a construction site below an elevated track, operated by Rapid MetroRail Gurgaon, in Gurgaon, India, in March 2014.

India's rise comes despite economic hiccups on the subcontinent. After enjoying speedy growth over the past decade, India's economy hit the brakes in 2012 with rising inflation, a growing current account deficit and a weakening rupee, which lost almost 13 percent against the dollar in 2013.

The growth of Asia's third-largest economy has slowed to 4.7 percent—far below the double-digit growth it enjoyed in recent years. As a result, India has been dubbed a "fragile five," a term used to identify five economies—India, Turkey, Brazil, Indonesia and South Africa—that are seen as too dependent on foreign capital.

But despite the recent economic slowdown, there's optimism for a bright future ahead.

The biggest driver of bullishness in India is the hope for a new government there. India is set to elect a new prime minister in April—results will be announced on May 16. Investors and the business world are betting on a more business friendly party—the center-right Bharatiya Janata Party (BJP) led by Narendra Modi—to win. Modi is known for welcoming foreign investment, and recent polls show the BJP positioned strongly in the race.

So far this year foreign investors have poured $2 billion into Indian equities, reversing the recent outflow trend.

"Their [BJP] agenda is basically to implement a wide-ranging program of economic reforms that could significantly untap growth potential for the country," said Andres Garcia-Amaya, global market strategist at JPMorgan. "Overall India has interesting valuations, prospects for faster economic growth led by better monetary and fiscal policies."

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Garcia-Amaya sees the potential for earnings growth in India as very appealing; He projects 12 to 16 percent growth for the next year or two.

"If you look at year-to-date, India is one of the strongest so far, not only in emerging markets, but throughout the world," he said.

Even aside from political issues in BRIC countries, India is the best bet, Garcia-Amaya says. Unlike Russia and Brazil—both net exporters of commodities—India is a net importer. That means that when China's economy slows, as it has been recently, it pushes commodities prices down, something that benefits India but hurts Russia and Brazil.

And when it comes to China, whose valuations are more attractive than India's: "I still think there's more to come from China's slowdown in credit. I don't necessarily expect a hard landing for China, but I do expect a lot of front-page news that are not so positive," he said.

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Bill Witherell, Cumberland Advisors chief global economist and portfolio manager, also has India at the top of his BRIC list.

"India has a very good future. Demographics are better than in most countries. Workforce age is increasing. It has a middle class that over the next five years will probably double in size," Witherell said. "This year and next year we see growth a little bit below 5 percent, but then picking up in 2016 through 2020 to 6-plus percent."

Read MoreFinding reason to invest in India amid BRIC letdown

In March, Cumberland Advisors and Goldman Sachs both upgraded India to "overweight."

Analysts' upbeat views on India come during a stretch where emerging-market exchange-traded funds—while down overall for the year—have been on a tear. As of Tuesday, the PowerShares India Portfolio ETF was up 7 percent over a nine-day stretch.

In spite of India's troubles over the past few years, more recent economic data indicate that India is heading in the right direction.

India's inflation, measured by the wholesale price index, dropped to 4.6 percent from 5.05 percent. The rupee has stabilized, gaining almost 3 percent against the dollar this year.

India's current account deficit, a key concern among investors, is shrinking. From October through December, India's CAD narrowed to $4.2 billion—or 0.9 percent of GDP—from $5.2 billion—or 1.2 percent of the GDP—in the previous quarter. The taming of the current account deficit is attributed mainly to the government's restrictions on gold imports and central bank measures.

Read MoreIndia leaves key interest rate unchanged at 8%

The new governor of the Reserve Bank of India, Raghuram Rajan, who took office in September, has also restored investors' confidence in India.

"He is one the world's top academic economists," said Arun Sundararajan, an economist at New York University's Stern School of Business and an expert on India. "In my view, there's a lot of optimism in putting him in charge because it means we will start getting world-class thinking on fiscal and monetary policy."

So what if the BJP doesn't win this month's elections?

"This is an economy that should be growing at 6 percent. All they need is to make some reforms to allow them to grow at the pace that they should be growing," JPMorgan's Garcia-Amaya said. "Even if the BJP doesn't win, it seems that finally politicians from both sides of the aisle are starting to understand what they need to do to unleash that potential."

By CNBC's Silvana Ordoñez. Follow her on Twitter @newsdumonde

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