I was on a relatively long vacation in India, and although it was supposed to be strictly a vacation, I couldn't help but observe a few things. Now I was not present when the US was growing post WWII, but it seems that it would have been very similar to India's growth at present. In all the talk about China, although justified, India gets ignored. It is much smaller than China but I believe it has a few characteristics that make it very interesting, especially for the enterprising value investor. There are restrictions at present for non nationals, but in time, they will probably be eased.
The private sector in India is growing at a very crisp pace. The problem is that the public sector is not keeping pace. By public sector I mean infrastructure and bureaucracy. Infrastructure here refers particularity to the roads, rail and electricity; and bureaucracy the slow judicial system, well, thinking about it - all public offices. Indian economy is growing at a 7-8% clip, but the productivity is low, comparatively, because of these issues. When and if the infrastructure is built, the productivity will receive another boost resulting in further growth (think turbo kicking in). Needless to say, corruption also plays a big part in hampering growth and there are no easy solution in sight. Importantly, India has a lot of people! A large number of people coupled with growth means increasing incomes. While this presents a huge social problem, it is good for business. Along with growth, think scale, which leads to increasing margins.
Now, in my opinion, the way a value investor (assuming he/she can invest) benefits is by virtue of India being an emerging economy, the markets are volatile - something an enterprising value investor can take advantage of! There are many firms which are extensions of international corporations. Nestle (NSRGY.PK) India, Novartis (NVS) India, Crisil (the leading bond rating agency half owned by S&P) would be some examples. Then there are others, family majority owned firms where one can invest alongside the controlling family (Tata, Bajaj, Mahindra). These firms, in my opinion, will generally take out many cliched concerns of investing in an 'emerging' economy. I do not pretend to be an expert on India and am learning. The purpose of this post is to introduce India and present some links which I've found useful.
- The Economic Times - The prominent business newspaper in India (in English).
- Fundoo Professor - A blog by Sanjay Bakshi, who teaches behavioral finance and operates a fund in India.
- Parag Parikh Financial Advisory - An advisory firm with a blog. Contains many research reports on Indian corporations.
- A Collection of Value Investing blogs in India - ...
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