Wednesday, September 15, 2010

Indian Indexes Reach Highest Levels Since Early 2008

While most of the developed worlds largest markets are far from pre crisis levels - and even the much worshiped Chinese market at a standstill for a few quarters - Indian equities are flying high and now are not that far from reaching pre crisis highs.

Highly respected Christopher Wood of CLSA [Mar 2, 2010: CLSA's Chris Wood: US Will be End Game for Sovereign Debt Within 5 Years]  says India may actually surpass Chinese growth rates as its demand is much more internally derived

  • Indian equities have the most attractive outlook in Asia this yearChristopher Wood, a strategist at CLSA Asia-Pacific Markets said. Annual economic growth may accelerate to 9 percent over the next five years, allowing the nation to overtake China as the world’s fastest growing major economy, he said.  “It’s the only economy in Asia driven by domestic demand,” Wood said.
(I have a bit of a qualm with that statement, as Indonesia escaped much of the global mess due being heavily dependent on home grown growth, rather than exports.)

From a recent John Markman article:

  • ....such optimism coincides with a time of galas in India that starts with festivals celebrating Ganesh, the elephant god of prosperity, and careens toward Divali, the festival of lights, on Nov. 5. It's a sort of Christmas season, when stores do half of their entire year's sales. Of course, unlike the holiday seasons of the past two years in the United States, Indians are out in full force.  "We'd expect many of the retailers to be in the region of 25% growth," Kumar Rajagopalan, chief executive officer of the Retailers Association of India, told Bloomberg. "The biggest segment of growth is the middle class."
  • Maruti Suzuki, which makes half the cars sold in India, will top $7.3 billion in the fiscal year ending March 31, 2011, an all-time high. The head of Hyundai  in India also said he's expecting his best sales ever.  "The demand is quite sustainable," Swati Kulkarni "There is the benefit of changing lifestyle, strong brands and sustainable growth rate."
As always let's put out the caveat that just as in China there are hundreds of millions of extremely poor in these countries... but both have growing middle classes, as opposed to the shrinking one here in the U.S.

The U.S. also seems to be facing a mismatch of skills to jobs.... whereas India (like China) is churning out those focusing on math & sciences.
  • U.S. universities are producing too few engineers to meet industry demand. About 70% of U.S. Ph.D. students are foreign born. The latest figures show that India's undergraduate schools produce about 600,000 engineers a year, compared with about 84,000 in the United States.
  • ... The company wanted to hire 1,000 people a year in the United States but faced a scarcity of talent. "It is a struggle," he told the paper.
A perfect world?  Obviously not - there are many huge issues from corruption to awful infrastructure in India... but the track is up, whereas we see what the direction is domestically as the definition of long term solution for every problem we face is simplistic "cut taxes" and/or "increase spending",  with zero attention to the root causes of our problems.  


As I've complained about in the past, there are actually very few options for American investors in terms of Indian exposure in individual stocks - I would not be surprised if the ratio of Chinese ADRs to Indian ADRs is somewhere at 15:1.  Even Brazil has more options on U.S. exchanges.  Which is apparently why when any Indian IPO comes to market, it is getting snatched up.  [Aug 13, 2010: MakeMyTrip (MMYT) - Why Can a Barely Profitable Travel Firm IPO Rally 90% in 1 Day? It's Indian]

In the 'old days' the only way to get broad access was via 2 closed end funds... thankfully, some ETFs (EPI, PIN, INP) have been introduced the past few years which have offered more efficient access.  Two small cap oriented Indian ETFs (SCIF, SCIN) have been introduced - thus far with little interest however - in the past few months to boot. 

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