India Up, China Down? Changing my Indian Focus

Interesting to see some weakness in Chinese shares this week, as GDP growth "slowed" to 11.5%. Wow, how will they ever survive ;) These interest rate cuts at 0.27% a meeting, are really quite ineffective. Ironic that we are cutting at a faster rate than China... ironic, not in a good way.

Meanwhile, India is doing very well. Looks like my timing last week in getting into the Indian names (Buying a Bucket of India), as the Chinese stocks seemed overcooked is working out well.

Today we have the two Indian Banks ICICI Bank (IBN) +9%, HDFC Bank (HDB) +7.5%; also my Indian copper stock Sterlite Industries (SLT) +7%. Even the broad closed end India Fund is +4.5%. Tata Motors (TTM) is lagging a bit but still up 3.8%.

While it is nice to get this short term victory in the stock prices, upon reflection I am going to reallocate my positioning in India. I have purposely stayed away from the outsourcing stocks due to the strong rupee (strong currency means less exports and these companies by nature are outsource firms!). I reluctantly created the Tata Motors (TTM) position as I built a basket of Indian stocks - at the time I wrote:

Tata Motors is part of the Tata Group (think General Electric of India) with their hands in everything. Unfortunately the more exciting parts of the Tata Group are not available to buy here in the US, and the automotive arm has some serious competition but again, this is a basket buy, and not a huge position.

So I am going to take this opportunity to cut the name out of the portfolio, as Tata Motors does have quite a bit of export business which will continue to be hurt as Indian gains power (and its currency appreciates) in the world. Plus the truck/automotive market is competitive - if I could own their parent company I would much prefer that. Eventually I will replace TTM with a broad based index for India: iPath MSCI India (INP). So this is more of a fine tuning of a market I think most US investors seem to ignore while they are chasing Chinese stocks. I'm attempting to keep good exposure to the country while staying away as much as possible from companies (that while still growing at healthy pace), have some export pressure due to currency strength, and sticking with companies less affected by this such as the banks, and Sterlite Industries (SLT). There is just a dearth of opportunities in the ADR market for Indian stocks once you get past the outsource shops and banks so it is hard to find opportunities.

So today, I am closing Tata Motors (TTM) 1.1% position and I took some light profits in Sterlite Industries (SLT) as well as its up from low $18s in the Friday swoon to near $24 or about 33% in a week. Ignoring the Friday swoon, it is still up nearly 12% since Monday morning.

Selling 700 shares of Tata Motors (TTM) generated $14,100. I'll redeploy these funds in the iPath MSCI India fund down the road when it invariably pulls back. I've brought Sterlite Industries (SLT) down to a 1.6%, keeping that core position, and looking to add back to it, on a pullback in this very volatile stock.

And I'll keep looking under rocks for some non outsourcing India stocks that trade as ADRs in the US. While the 2 bank stocks are volatile, their 'lack of financial innovation' (see "Quote of the Decade") should give them a premium since people actually understand what they do, and they aren't hiding things off balance sheet unlike our treasured US institutions. Not to mention they are in a high growth area for next few decades.

Long all names but Tata Motors and iPath MSCI India in fund; no personal positions.