By Brandon Clay
In the emerging markets arena, India frequently plays second-fiddle to China. India is the second-largest country in the world by population. It’s also growing fast, but not as fast as China. Investors should not be deceived by the statistics: India offers plenty of opportunities. The government wants to see annual economic growth top 10%; if that goal were reached and maintained, India’s economy would double in nine years and in 16 years be as big as China is now, according to a recent report in the Hindustan Times.
That’s good stuff. Additionally, in the near-term, a report released earlier this week by Kotak Mahindra Old Mutual Life Insurance says Indian stocks will rise another 15% to a record high by March 2011. Which individual Indian equities are poised to benefit? We’ve previously examined an Indian ETF, but today we’re going to look at a superb Indian brand. Tata Motors (TTM) is India’s top automaker and the owner of the Jaguar and Land Rover luxury brands.
China is now the world’s largest car market, having surpassed the U.S. earlier this year, but India is on the rise as well. On Tuesday, Tata said it sold almost 67,800 vehicles in July, a 41% increase from July 2009. Sales of commercial vehicles jumped 26%, with light commercial vehicle sales popping 15%. Sales of medium and heavy commercial vehicles surged 43% over July of 2009, Tata said. On top of that, Tata said it posted a fiscal first-quarter profit of $430 million after enduring a loss of $71 million in the year earlier period. Total sales came in at $5.8 billion.
In a testament to the strength in Tata’s shares, the stock was up more than 4% yesterday in U.S. trading while the broader market was considerably weaker. Tata shares hit another fresh 52-week high on volume that was nearly double the daily average. Some investors are understandably gun-shy about the auto sector after the calamity of the last two years. General Motors became property of the U.S. government. Chrysler is an afterthought, and though Ford (F) has rebounded, it doesn’t pay a dividend.
On the other hand, Tata has a fair dividend yield of 2.3%. It has also paid a dividend in 52 of its 54 years as a public company, making Tata an ideal way for a dividend hunter to tap into emerging markets growth without incurring significant risk.
Not impressed by the fundamentals? Tata’s technical outlook is also appealing. The stock has recently broken out in a big way and is solidly above its 50- and 200-day moving averages. Tata’s stock isn’t a runaway train, but it sure is acting like a fast car. Investors who bought on our recommendation in April 2009 are now sitting on gains of about +175%. To buy into India’s booming auto market, go with Tata Motors. All the best.
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Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.