WEF experts give their verdict on India's best investment bets in 2012

Mumbai: After being battered in the stock markets and downgraded by analysts and prominent ratings agencies, here is some good news for banks.

Experts at the first session of the World Economic Forum (WEF) India Summit being held at the Grand Hyatt in Mumbai said the financial services sector, which covers banks, non-banking financial institutions and gold loan companies, remained the best bet for investors seeking to play the India growth story in 2012.

Growth in the Indian economy is being driven by consumption arising from a confluence of factors: a rising middle class, increasing urbanisation and favourable demographics. As a result, retail and consumer goods and financial services have been among the most favoured sectors for investors, said experts at the panel discussion entitled "India Market Watch 2012".

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While the main investment themes remain the same, experts noted that some new pockets of growth are also available now, such as education, healthcare, e-commerce, information technology and insurance.

While infrastructure has been touted as a "must-invest" sector in the past, actual investments have not been as high as expected. VK Bansal, chairman of the investment banking division at Morgan Stanley India, said ports, in particular, had not seen enough investments, and said there was opportunity there.

Not all experts were so enthusiastic though. Rahul Guptan, head of global India capital markets group at law firm Clifford Chance, was pessimistic about investing in India in the short term.

"Foreign investors are not talking about multi-billion dollar investments anymore," he pointed out. High inflation, high interest rates, policy stagnation, high current account deficits could be blamed for that, he added.

Nevertheless, the entire discussion panel agreed that while the short term looked bleak, the long-term story for India remained intact.

The question is, how long will the short term last?