India’s Decade: Time to create Wealth!

Hindustan Chamber of Commerce: REVIEW, March’2010

100217: Former President Dr. APJ Abdul Kalam once said he dreams of seeing India as a developed nation by the year 2020. We cannot say if his dream would materialise by 2020, due to reasons particularly related to faster execution of various measures, policies and projects, but definitely though the struggles may exist, India is on a growth trajectory and this decade would belong to us. We should consider ourselves lucky to be part of this growth as our future generations may not see the kind of growth we are going to witness over next 10 to 15 years.

We are more globalised and integrated with the world today than ever before. The world is watching us & the interest shown by the developed countries for India is at the highest point, the FII flows and the FDI flows into the country justifies the statement. We are just behind China and hopefully would overtake them to become number one at some point of time, Hence when the country grows, so would the financial markets and one should be part of this growth and create wealth for himself. Markets in India are poised to grow for many years and would deliver the highest possible CAGR returns to prudent investors.

India now needs committed governments which can deliver responsibly and in a transparent manner. The present government has the mandate to take bold steps in reforms and deliver what India requires to be a super power. Almost Rs.1 Lac Cr is lined up for developing the roads in India over few years, if these kinds of thoughts and ambitions continue within the government and delivered on ground then it can further propel the GDP growth which can attract more foreign money into the system.

The latest estimate as per IMF for Indian GDP growth is 8% which is almost 150 basis points what analysts were estimating at the beginning of the year. Finance Ministry though cautious has estimated that we will achieve 7.75%, so is the case with Index of Industrial Production numbers which have surprised many recently and are on consistent growth track. Many may argue that the growth is artificial and seems good due to low base effect. The fact remains that Indian GDP is just around 20% to 25% dependent on exports, hence our own population is consuming majority of what we produce and would be the last to get effected compared to our Asian peers who are almost upto 65% dependent on the developed nations for their own growth.

We feel anyone invested in market for long term to participate in India’s growth would make fairly decent gains when compared to any other investment avenues. A lot of focus is at present given to the budget and particularly on the withdrawal of the stimulus announcements made during the slowdown last year. Due to inflation fears the government may try to roll back some stimulus announcements but no drastic decisions are expected which can set back the recovery process, further more the Direct Tax Code is expected to be in place from 2011 and hence with just one year to go the finance minister may prefer not to tinker much with the policies.

Inflation is one of the major fears lurking the financial markets and the recent 75 basis point hike in CRR by the RBI sent out negative signals. We believe this trend may not continue with high pace since the major problem is on account of food price driven inflation and that cannot be controlled by lending rate increase. The infrastructure on the supply side has to be improved which can control the wastage in transit and policies have to be looked into which can reduce the problem of hoarding. India spends negligible on this aspect compared to the developed countries and there is immense scope for improvement.

We are very optimistic on the infrastructure developing companies and the power utilities companies for the long term. Education is a sector which would be in great focus in the times to come. Programmes like Sarva Siksha Abhiyan would further make the sector interesting and we can expect more from the budget. Hence any long term investor in these sectors would make good money, by long term we mean three years and above.

Stock markets may remain and may get volatile time to time due to factors and news flow from the global markets but every volatile market would be a opportunity for the investors as the underlying strength of India and its consumption story would finally kick in. The recent fall was also on news that EU countries like Greece, Spain, Portugal may default on their sovereign debts and the news then slowly subsided as people realised that the expected may not happen. India also has to deal with its fiscal deficit which is the biggest concern right now. Disinvestment is not the only way of doing it, its good but making state agencies buy the shares of companies like NTPC and then claiming success will not lead the government anywhere. Hence opportunities will keep knocking the doors its upto us on how we react.

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