Dow Jones Stock Index Soars from 8,200 to 10,000 in a Single Day! India Did!
Stock-Markets / India May 27, 2009 - 10:09 AM GMTBy: Uncommon_Wisdom
Tony Sagami writes: How would you react if the Dow Jones jumped from about 8,200 to 10,000 in a single day?
That type of one-day moon shot happened to the Indian stock market last week. The Bombay Stock Exchange’s benchmark Sensex vaulted 2,110.79 points, or 17.3 percent, to 14,284.21 May 18.
And if you would’ve paid attention to the article I published April 15 and invested in India, you would be whistling all the way to the bank today.
In that article, I stated that, “India is still growing very strongly, and I expect its stock market will be one of the best places to park your money in the next 5-10 years.”
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| India’s stock markets got a boost after the recent and unexpected victory by the country’s Congress Party. |
Why? Because after month-long elections, the Congress Party unexpectedly captured 261 seats in India’s 543-seat Parliament and effectively neutralized the powerful Indian Communist Party, which lost half of its parliamentary seats.
Investors are betting that the near collapse of India’s once powerful communist parties will lead to long-awaited economic reforms, many of which the communist faction had blocked over the last five years.
Indian investors hope that foreigners will be more eager to invest in their country, are anticipating tax cuts, and significant infrastructure spending like the Chinese are doing.
The elections are an important positive for India, but that alone is not the reason the Indian stock market is one of the most powerful growth stories on the planet.
Here’s why:
You hear a lot about China’s 1.3 billion citizens, but India is a close second with 1.1 billion residents.
Out of those 1.1 billion people is a large, educated, skilled, English-speaking workforce and one of the largest pools of scientists and engineers in the world.
India is growing … FAST. India’s economy has averaged 9.5 percent growth over the last five years and is expected to grow by 6.5 percent this year.
That’s why India is the fourth-largest economy in terms of purchasing power and the 10th most industrialized country in the world.
The 30 largest companies in the Mumbai Sensex index increased their earnings at an average rate of 35 percent in the first quarter. Of 800 publicly-traded companies, average earnings growth is a blistering 17 percent.
India has a well established and vibrant banking system, its National Stock Exchange is the third-largest in the world, a strong, independent judicial system, a free and vibrant press, a sophisticated legal and accounting system, and a business-friendly protection of intellectual property rights.
Several Options for Investing in India
What’s the best way to invest in India? That depends on what kind of investor you are. If you are more of an Exchange-Traded Fund investor, you have several choices.
Here are some to consider:
iPath MSCI Total Return India Index (INP) counts as its top holdings Reliance Industries, Infosys Technologies, ICICI Bank, Housing Development Finance Corp. and HDFC Bank.
PowerShares India Portfolio (PIN) with a 0.78 percent expense ratio, this fund tracks 50 of the largest companies in India.
WisdomTree India Earnings Fund (EPI) with a 0.88 percent expense ratio, this fund is tied to an earnings-weighted index of 150 Indian companies.
Don’t overlook closed-end funds though, which can often sell at huge discounts to the underlying net asset value. There are several closed-end funds that specialize in India.
Check out these two:
The Morgan Stanley India Investment Fund (IIF) is a closed-end fund with an objective of long-term capital appreciation, and holdings that run the gamut from energy to agriculture, to mining, pharmaceuticals, telecommunications, building materials and more.
This is a no-load fund, and its overall fees run about 1.4 percent a year, less than the sector’s 1.9 percent average.
The India Fund (IFN) is diversified across various industry sectors, and the fund seeks long-term capital appreciation with total fees of 1.64 percent.
I believe the most effective way is to invest directly in India’s best companies by buying individual stocks.
Indian Blue Chips on the NYSE and NASDAQ
In case you think buying India stocks is hard or expensive … think again. There are several India blue-chip stocks traded on the New York Stock Exchange and Nasdaq such as Infosys (INFY), HDFC Bank (HDB), ICICI Bank (IBN), Patni Computer Systems (PTI), Tata Motors (TTM), and Wipro (WIT) to name a few.
Is it too late to invest in India now that it has jumped over the moon? Short-term, the answer is yes because I suspect that profit takers will push prices down in the next few weeks.
Long-term, India’s prospects look even brighter today than they did in April when I wrote that glowing article.
I highly encourage you to make sure you include at least a 5 percent to 10 percent long-term allocation to the Indian stock market.
Regards,
Tony
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