RSS feedNot sure if this is going to become the next post series, but I thought I’d take a break from the tutorials on stock analysis and take a look at broader investment topics - like international investing in emerging markets. Emerging markets particularly China and India have been all over the financial press over the last year for their unbelievable performance as well as the massive sell-off (and partial bounce back) that they have suffered over the first half of 2007. One particularly interesting emerging market has been India.
India as an investment opportunity is often overshadowed by its close neighbor, China. China’s government and economy tend to make the most international noise, but let’s not forget that India represents a potential consumer base every bit as large as China’s and is a country that is arguably further along in the emergence of its middle and upper class. A look at the following graph paints the picture well enough:
The little yellow line is the S&P 500 and the actual chart is of IFN (Blackstone’s exchange traded India Fund). It doesn’t necessarily track an index of Indian stocks, but it is a relatively good approximation of the returns available in India. As you can see, despite the recent fall in the Indian markets, returns have been quite good over the last 5 years. Contrary to the popular stereotype that India’s economy is buoyed by low skill companies specializing in phone service, India’s economy is lead by high skill companies including true information technology leaders and pharmaceuticals. Furthermore, the country’s GDP is growing at a terrific rate (9%+) and the rupee continues to strengthen against the dollar.
Things aren’t all rosy, though. As seen in the graph above. Indian stocks on average of fallen upwards of 14% on the year. Despite the sell-off, Indian stocks still trade at some of the highest price-to-earnings multiples of any in the world. There are questions about the economy as well including a very high fiscal deficit as well as ominous inflation trends.
So, should you invest in India? Maybe. But, if you’re not an Indian resident, it’s actually quite difficult. At the moment, only one exchange traded product, the MSCI India iPath ETN (NYSE: INP), tracks an India index. Two closed ended exchange traded funds also exist, the aforementioned India Fund (NYSE: IFN) and the Morgan Stanley India Investment Fund (NYSE: IIF). As a result of the lack of options for investing in India, these funds often trade at large premiums to NAV and, as a result, can be especially risky when the Indian markets top off as they have recently.
Don’t worry, though. Given that the market seems to be correcting a bit, there is time to wait. Indian ETFs are on their way so keep an eye out. Furthermore, opportunities exist to invest in Indian companies which decide to list in America. Top companies currently listed here include: Infosys Technologies, Rediff.com, and Wipro. For now, as an investor interested in Indian opportunities, the best idea might just be to get a grasp of the top investments available there and keep an eye out for their listings here in the US. A great place to find information on Indian stocks and general trends in the Indian markets check out: http://www.indian-share-tips.blogspot.com/.
