Investing in India: Is it Safe?
The fact remains that India is still a third world country. Investors in "emerging markets" or developing countries are always the daring kind-and rightly so-as recent history has shown. If you have seen the major south east Asian emerging markets crashes in 1998, and more recently, the Argentine collapse in 2001, you know what I mean. I will say though, that India is different.
India is a BIG emerging market. Even without the growth, India is a big economy. It has the 4th largest GDP in the world (see ranking here), and even though GDP/capita is like that of a third world country, the sheer size of this giant makes it a much less risky investment than a smaller GDP country. In economies, size does matter.
And the stock market of India is NOT overheated. Not yet anyway. It has gone up a bit in the last few years, but this is after many years of going nowhere.
When I travel to India (often in the summer) these years I see an amazing change in the psyche of the country. This is a country with the lowest per minute cell phone call rate in the world (I am a big believer in communication being a central part to development; cell phones and Internet make the world more efficient, enhancing productivity immensely). It is a country with 14 official languages (and numerous others!), with a population almost four times the size of the United States. The media is independent, the democracy is thriving, and the Government is no China or Argentina-they are open and clear (China isn't), and are not overspending or partying (Argentina before the crash). In fact, India has a lot of cash in its coffers, more than $100B in foreign currency reserves. So even though the average remains a developing country, the extremes of this country (sectors like Tech, Internet, etc) are very much at par with the developed world. And remember, these extremes, just due their sheer size, are bigger than many economies of the world.
Where there is risk, there is potential to make big money. And in my opinion, India remains a lower risk than what is indicated by it's "developing country" or "emerging market" status. And even though holding volatile stocks like SIFY and REDF is a bit hard---I am in it for the long term, and am willing to ride the bumps. Because I believe in the overall system and infrastructure in India being conducive to good business, which in the end is good for the stock market. And I use REDF and SIFY as proxies on the India stock market, kinda like buying options on the market itself.
Sanjay John G.
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India is a BIG emerging market. Even without the growth, India is a big economy. It has the 4th largest GDP in the world (see ranking here), and even though GDP/capita is like that of a third world country, the sheer size of this giant makes it a much less risky investment than a smaller GDP country. In economies, size does matter.
And the stock market of India is NOT overheated. Not yet anyway. It has gone up a bit in the last few years, but this is after many years of going nowhere.
When I travel to India (often in the summer) these years I see an amazing change in the psyche of the country. This is a country with the lowest per minute cell phone call rate in the world (I am a big believer in communication being a central part to development; cell phones and Internet make the world more efficient, enhancing productivity immensely). It is a country with 14 official languages (and numerous others!), with a population almost four times the size of the United States. The media is independent, the democracy is thriving, and the Government is no China or Argentina-they are open and clear (China isn't), and are not overspending or partying (Argentina before the crash). In fact, India has a lot of cash in its coffers, more than $100B in foreign currency reserves. So even though the average remains a developing country, the extremes of this country (sectors like Tech, Internet, etc) are very much at par with the developed world. And remember, these extremes, just due their sheer size, are bigger than many economies of the world.
Where there is risk, there is potential to make big money. And in my opinion, India remains a lower risk than what is indicated by it's "developing country" or "emerging market" status. And even though holding volatile stocks like SIFY and REDF is a bit hard---I am in it for the long term, and am willing to ride the bumps. Because I believe in the overall system and infrastructure in India being conducive to good business, which in the end is good for the stock market. And I use REDF and SIFY as proxies on the India stock market, kinda like buying options on the market itself.
Sanjay John G.
Subscribe now to The Wall Street Journal and get up to 8 weeks FREE
The Prudent Speculator -- Ranked #1 by Hulbert for 10, 15 and 20 year performance...Click Here!
4 Comments:
All third world markets are the same. India will collapse too, just wait! I am short these silly Internet stocks of India.
Ron
Another way to play the Indy market is buying funds like IIF and IFN.
Nirmal Pant
California
Brilliant write-up as always!
Great article! A young India will be more interested in Internet than any other consumer item. So definitely a good pick for mid to long term. I personally think REDF will be at $30.00 by Dec 2006 (a 50% growth from current level)
Unni Nair
Milwaukee
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