Chitchat Ho Ching Bet Right! AMDK Media Praised India Sky High!

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India Is Now 'The Darling' Of Global Markets


Happy India. A woman reacts after having colored powder smeared on her face by a friend during Holi celebrations in Mumbai on March 13, 2017. India's stock market is beating the averages in emerging markets, the S&P 500 and FTSE Europe this year. (Photo by Dhiraj Singh/Bloomberg)

So long, Brazil. So long, Russia, Mexico, China and the S&P and the Dow 20,000. The best major market in the world this year is India.

It's caught everyone by surprise because it has not been a major headline. It doesn't have the political soap operas that are still airing out of Brasilia and Moscow. It's not fighting a potential trade and immigration battle with the White House. And it's large enough (with around 1.2 billion people) that the Wall Street crowd loves it. More importantly, the immigration story that was such a headwind for Indian IT outsourcing firms led by Infosys has been put on hold. In fact, in investor speak, Infosys is nearly overbought. The Wisdom Tree India (EPI) fund already is, and it is up 18.26% this year, beating second-place Brazil, which is up 14.4% in dollar terms.

"If you look across the countries the IMF tracks across the globe, how many of them are growing over 7%? Iraq, Myanmar and India," says Gaurav Sinha, an asset allocation strategist for Wisdom Tree. "India is the only large country posting that kind of growth that is accessible for investors. There is a strong investment case in India," he says.

Here's a few short ones: demographics. Sixty five percent of the population is under the age of 35. It's got a low base, and lots of poverty. This is kind of like China circa the 1990s, only without the one-party rule, which means things move at the speed of a tortoise. Tech savvy. The much discussed goods and services tax -- a big bang reform promised by prime minister Narendra Modi -- is ready to roll out this summer.

See: For Wall Street, India Is The Best Of Asia -- Forbes

For India's IT Outsourcing Companies, H1-B Visa Safe This Year -- Forbes

The GST unifies taxes across state lines, making it easier for companies to ship goods and move freely throughout India without unnecessary tax burdens. It is believed that this will free up capital over time, a long-term positive for India.

Unfavored earlier this year because of fears surrounding immigration reform, Infosys is riding the momentum of the broad Indian stock index. Tech accounts for over 10% of MSCI India.
Unfavored earlier this year because of fears surrounding immigration reform, Infosys is riding the momentum of the broad Indian stock index. Tech accounts for over 10% of MSCI India.

Maybe it's because of its old British colonial days, but India is quite stable much in the way that former British colony Hong Kong is more stable than mainland China. India has found its own footing now, of course. But as the world's largest democracy, India stands out among the big emerging markets in every way. It's not a commodity producer like Brazil and Russia and even Mexico. It's a commodity importer like China, but is not an autocratic society like China.

Its economy is more open than China's, and investors can buy India's biggest companies, from banks to energy firms. Try buying equity of Mexico's oil major Pemex. You can't. It's not traded.

For much of the 1960s through the 1980s, India was a totally closed economy. It was hard for Indians to import things from other parts of the world. It is said that the founder of Infosys -- Narayana Murthy -- even had a difficult time just to buy a computer. Foreign loans were not readily available like in other emerging markets, so they had to finance in rupees with credit-card-level interest rates. That forced a lot of good business practices in the Indian corporate sector that lasted, for the most part, even when markets were open and India's biggest firms had access to dollar debt, says Wasif Latif, a fund manager with USAA.

"For all the torturous bureaucracy you have to go through there, you at least get the stability," he says. "Back in the '90s when I used to manage emerging markets, India was a safe haven while the rest of emerging markets were turbulent. It has a higher valuation because of that to this day."


In Search Of India's 'Jungle Book' Animals

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Recent changes in the currency markets caused some disruption when the central bank stopped printing large bills, forcing cash hoarders to either buy very big safes to store all their smaller bill notes, or open up bank accounts. The move is twofold: it formalizes the economy, which cannot be understated, and it can help reduce some of the corruption in India because it will be hard to store all that cash in small denominated bills. Moreover, it also builds a tax base. India has one of the lowest percentages of tax revenue per GDP than any emerging market, at less than 20%. This is basically an informal economy surrounding a more sophisticated one in major cities like IT hub Bangalore and crowded urban areas like Mumbai. The monetary change almost forces small mom-and-pop shops and farmers to open bank accounts. Investors see this as a short-term pain in the neck for business, but are all on board that this is positive long term. It modernizes India, the most behind-the-times country among the BRICs.

There is also the problem at India's big banks, namely the State Bank of India. Not all of India's executives learned from the fit and trim years in the '80s. Former billionaire Vijay Mallya is the poster child of nonperforming loans in India. The liquor lord turned failed aviation executive filed for bankruptcy on his Kingfisher Airlines, making Mallya one of the more publicized instances of India's state bank defaults. Government banks account for nearly 70% of all lending.

"India doesn't look bad at the surface, but when you peel away the onion...," says Rajiv Jain, an ex-star manager at Vontobel Asset Management who has gone solo to open a Florida-based boutique investment firm called GQG Partners. "I'd be pretty nervous on India. It's just way too expensive right no


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