In­dia:

Finweek English Edition - - INSIGHT - I HAVE BEEN MOVED Tandisizwe Mahlutshana

by some lit­er­a­ture lately about the growth prospects of In­dia, per­cep­ti­bly cre­at­ing a buzz around the BRICS Sum­mit in Dur­ban this week (2627 March). A quick sur­vey of the BRICS re­veals that China stands out a star. Sure, China is one in­deed, but you’re miss­ing out on be­friend­ing a ris­ing star.

Let’s paint a quick pic­ture. Ac­cord­ing to the World Bank es­ti­mates, In­dia has to in­vest about $1.7tr to up­grade its in­fra­struc­ture over the next ten years, the en­tire African con­ti­nent needs about $950bn over the same pe­riod. The coun­try has a sav­ings rate of about 30% with a lit­er­acy rate of 74%, an es­ti­mated 2012 GDP growth of 5.4%, lower than China’s 7.8% but higher than that of its other its BRICS brothers. And, more than 50m In­di­ans have a an­nual dis­pos­able in­come of be­tween $4 000 and $20 000, and this is ex­pected to grow as the coun­try ma­tures.

So I chat­ted to In­vest­ment So­lu­tions Strate­gist Chris Hart for a low­down on the coun­try and he says the highly pop­u­lous na­tion of 1.2bn peo­ple is just start­ing out. He sus­pects that China’s su­per growth era, as it is a bub­ble econ­omy, may be coming to an end.

He points out that ad­van­tages such as a young pop­u­la­tion, cost ad­van­tages as a re­sult of the pool of skills the coun­try has, the shrink­ing de­pen­dency ra­tio lead­ing to fur­ther dis­pos­able in­come as well as the mas­sive in­for­mal sec­tor posed for for­mal­i­sa­tion in the coming years are some of the at­trac­tive qual­i­ties this coun­try boasts.

In ad­di­tion, in­fra­struc­ture devel­op­ment and man­u­fac­tur­ing pro­duc­tion are def­i­nitely growth ar­eas for In­dia, and are very high re­turn sec­tors. UK car man­u­fac­turer, Jaguar Range Rover, now owned by In­dia’s Tata Mo­tors, has re­cently an­nounced that it is con­sid­er­ing man­u­fac- tur­ing its cars in In­dia, from scratch.

But how do we cash in on the 5 600 listed shares, though con­cen­trated on the top 5, such as Tata, Re­liance and oth­ers? Not so easy, it seems. In­dia is no­to­ri­ous, though to a lesser ex­tent now, for its pro­tec­tion­ism where cer­tain sec­tors are con­cerned. For ex­am­ple, its re­tail sec­tor was only re­cently opened to for­eign in­vestors.

A search for any lo­cal In­dia- spe­cific ETF plat­forms did not yield pos­i­tive re­sults. China, for ex­am­ple, has the Deutsche Bank MSCI China TR In­dex ETN, which has hold­ings in China Mo­bile, China Con­struc­tion Bank, ICBC and Ten­cent, to name but a few.

How­ever, Hart ad­vises that go­ing pas­sive on In­dia may not be the best strat­egy. He says In­dia’s stock mar­ket is not re­flec­tive of the coun­try’s broad growth and there­fore would ad­vo­cate for an ac­tively man­aged man­date.

If this arouses your cu­rios­ity, per­haps look at the Old Mu­tual Global Emerg­ing Mar­ket Fund, which al­lo­cates about 11% to In­dia, with a fund size of R1bn or the Mo­men­tum Emerg­ing Mar­kets Fund, with a 3.2% al­lo­ca­tion in a $105m fund.

IN­DIA’S HOT FACTS New Delhi $1.85tr in 2011 ac­cord­ing to the World Bank 1 210 193 422 (623.7m males and 586.4m fe­males) on 1 March 2011 65.8 years (males); 68.1 years (fe­males) in the pe­riod 2006-2011 Pro­vi­sional re­sults of 2011 cen­sus, the lit­er­acy rate in the Coun­try stands at just over 74% - around 82% for males and just over 65% for fe­males. Coal, iron ore, man­ganese ore, mica, baux­ite, pe­tro­leum, ti­ta­nium ore, nat­u­ral gas, mag­ne­site, lime­stone, arable land, dolomite, gyp­sum, ap­atite, phos­pho­rite, flu­o­rite, to name a few. 3.3m sq km

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