I have held two Indian positions in my stock portfolio: a fund tracking India in general and ICICI (NYSE:IBN) bank. I have liquidated the former, while I added to the latter. Why? Because this private bank is one of the best ways to play the modernisation of India.
The Indian opportunity
India is one of the biggest countries in the world. It has a population of 1.2+ billion. To get right to the point, I will tell you why I want to own a financial in India, rather than another kind of business.
Financials tend to grow in lock-step with economic growth.
Money, and these financial institutions, are at the core of any economy. It's one of the essential sectors, such as homebuilding. A bank essentially takes a cut on anything happening in society:
- Starting a business and you need a loan for that? The bank gets a cut.
- Need to pay for your daily expenses? Get a bank account and the bank gets a cut.
- Saving up your money? The bank gets a cut.
The list goes on and on. If economic activity in India increases, whether it be through more consumption, more investments, or anything else, the banks will thrive.
India is one of the few economies growing at a 6%+ growth rate. It has done so for the last decade, and will likely continue to do so.
The beauty of financials is that I don't need to pick the industry or even the business/brand. Will Indians prefer taking trains, or taking airplanes? Doesn't matter much. Will they prefer a fresh Mango Lassi or coffee from Dunkin' Donuts? Doesn't matter much.
Demographics combined with urbanisation leads to economic growth
We've talked about India housing almost 1/5 of the entire world population. What's more astonishing is the fact that
