Even Now, This BRIC Country Is Still A Good Investment
12/05/2008
For countries in the BRIC group such as India, this global economic crisis is more disturbing than to larger, well-established countries such as the U.S., U.K. and European power houses like Germany and Spain.
And it isn’t just because our economies are better equipped to handle the downturns in many ways. It’s also a matter of lofty dreams falling short. Oh yeah, most if not all of the countries struggling right now will recover, but that doesn’t mean they haven’t suffered severe psychological blows right along with the financial chaos.
Just as it’s difficult for the U.S. to consider any other country as #1 but itself, as I discussed in a previous blog, it’s hard for Cinderella stories to suddenly find themselves on their knees scrubbing the floors once again.
Not to say that India is going to go backwards, but it doesn’t look like it will be growing at the pretty clip it was over the past few years either. Despite its hope that it could avoid U.S. and European woes, India’s fairytale rise from just another country to a business power everybody wanted a little piece of has hit a glitch or two and it looks like they’ll be feeling the same pain as everybody else.
Predictions Of The Future Meet The Present
In an interview with fellow Agora Inc. publication, Money Morning, Karim Rahemtulla gave the following commentary:
India’s economy, while insulated somewhat from the global crisis because of its minimal reliance on outside trade, may still suffer from the current malaise because of its growing export sector. The rate cuts [on October 20th], which will likely be followed by more cuts, are being made to ensure India’s competitiveness by allowing rupee depreciation, which helps its strong outsourcing and tech sectors.
Karim also said that India quite simply can’t afford a recession. Which is why it’s doing everything possible to avoid one. That will probably include another cut in interest rates to boost confidence, especially after the terrorist attacks barely a week ago that rocked Mumbai, killing 171 people.
Since October, it has already cut its key lending by 150 basis points, and in a nationwide effort to maintain credit flow, the government has also released billions of dollars worth of funds into the banking system.
And just today, the government has allowed fuel retailers to lower gasoline prices by five rupees a liter (approximately $0.18927 per gallon), which is the first cut allowed in 22 months.
Still A Country - And An Investment - To Be Reckoned With
But here’s Karim’s latest take on India, just issued today:
Before I go any further, sincere condolences to the victims of the terrorist attacks in Mumbai, and those who had relatives there. I’ve spent quite a bit of time at the Taj Mahal Hotel, which was the focal point of the media for the duration of the crisis. It sits steps away from the Gate of India, a massive archway that overlooks the Bay in Mumbai.
Up until about 10 years ago, Mumbai was better known as Bombay, which derived its roots from the Portuguese words for “beautiful bay” (Bom Bahia), or a perversion of the name of an Indian Goddess Mumbadevi.
Regardless, everyone knows about Mumbai now. Life will continue there - and even thrive. Like New York, it’s a city that doesn’t sleep and does best when faced with adversity.
I look forward to returning to the Taj Mahal Hotel, truly one of the pearls of the Orient. Indian stocks like XXX, a member of our XPR portfolio, still present an excellent way to benefit from the IT sector at a superb discount to growth. Currently, XXX trades at 10 times earnings, while growing at twice that rate.
So as of now, despite the recent turmoil, there’s good news for India still. It might have been slowed down by the economic chaos, but the country is still on track to becoming one of the most formidable economies in the world.
India might take longer than China to recover on this one, thanks to problems both of their own making and ones out of their control, you can literally bet that investors will be flocking its way just as soon as the economy turns right-side-up again.
India Wields Its Monetary Axe… But Can The Country Stave Off Recession?
Friday, December 05, 2008 — by Jeannette Di Louie, Assistant Editor of Mt. Vernon Research
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