'India's not for the faint-hearted'


Source: ETBB

Many of our Swiss and foreign clients mistakenly classify India as a ‘bubble’, but in my view, much of the ‘bleeding’ has stopped. More than 50% of the incoming flows in India this year have been redeemed, many at painful losses. Ironically, the poor result came on the heels of good economic and company news in India, and largely due to heightened uncertainty in the US with regard to growth and inflation.

Investors will increasingly discriminate about where to invest in emerging markets. So, going forward, India will need to show its mettle and validate its growth story. Infoys’ stellar earnings report was encouraging in this regard. India is not for the faint-hearted, but we believe that the same pattern experienced in prior corrections will repeat itself. There is also a disturbing perception that India is expensive relative to other emerging markets, and that much of India’s performance has been due to valuation expansion.

The chart ‘On A Growth Drive’ shows that much of India’s capital appreciation has been due to phenomenal growth in earnings, rather than valuation excesses as during past corrections. Foreign investors have failed to grasp that India, unlike other emerging markets, depends less on US consumption, unlike say, Korea, Taiwan or Brazil. False perceptions and awful sentiment create interesting buying opportunities, but anticipating the duration and extent of corrections is pure guesswork.


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One Response to 'India's not for the faint-hearted'

  1. Anonymous says:

    Hi..You are doing a wonderful work…I really appreciate this and find your blog very very useful..I just can’t stop myself from reading your blog..All the best…Narendar Kumar(Chennai) narenmt @ gmail.com (Can I add your gmail id in my Gtalk?)

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