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Best Bets For Investing in India

A few things to keep in mind before investing in India
1. The stock market has moved from 3000 in 2003 to 20,000 in 2007.
2. India imports over 70% of its oil. Unlike China, India hardly has any cheap sources of "equity oil". High oil prices(if the rupee stops appreciating) could fuel runaway inflation.
3. Real estate prices have gone up 4 fold in 7 years in most Indian cities. I live in Bangalore and a half-decent 1000 square feet flat costs at least 5million rupees(130,000 dollars) in the suburbs. This is a three-fold increase in 5 years.
4. The IT sector accounts accounts for a third of India's stock market capitalization and trades at 30+ PE multiples. A major portion of the phenomenal growth in the last few years has been driven by outsourcing by the financial sector. This might take a big hit if the multi-billion dollar losses at the banks starts affecting IT budgets for 2008.
5. Any sharp reversal in the dollar could lead to an even sharper contraction in the Indian market's PE multiple. This has been the behaviour for the last two-three years.