Mr. Vedant Mimani and Mr. Rahul Saraogi of India specialist Atyant Capital think that, odds are, investors who are jumping into the leading SENSEX index (India’s Dow Jones) companies at this time may be in for a rude awakening. They point out that the 50% plus gains in the SENSEX index during 2006 have brought the total capitalization of the index to 1.2 times India’s GDP. The gains are also centered on the largest companies, while 1,100 of the 6,000 or so companies that trade on the exchanges are actually at 52 week lows.
Furthermore, India’s government is making little progress in crucial areas such as market reforms, infrastructure, corruption and rural chaos. I agree with much of this analysis and have recommended to members of the Chartwell Advisor not to invest in the new India ETF at the present time. In particular, I will have an article in the next issue of Forbes Asia which focuses on the problems of rural India and the need for much more progress on market returns for private investment in infrastructure.
Disclosure: Author has no position in INP.