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Viking
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India is one country i know very little about. So i have been trying to change that. Below are three videos from a German TV station that discuss some of the current themes.
 

Outside of the US and Canada, India is the next most important country for Fairfax: Fairfax India, Digit, Quess and Thomas Cook. Prem also has very aggressive growth plans for Fairfax investments in India to increase materially in the coming years. Bottom line, India will be an increasingly important part of the Fairfax business mix in the future. 
 

 

 

 

Edited by Viking
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The videos did a good job of highlighting some of the issues at play, although I don't think I am any further ahead in predicting what will happen.  I find international politics a riddle inside an enigma.

 

What I am watching is the economic performance of India in the next 12 months or so.  I have read that they are buying Russian oil at discounted prices - will this have a material positive impact on their economy?

 

 

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If population and population growth have anything to do with economic activity, then India is entering the golden age. 

 

Both India and Elon Musk are populating the world.

 

OTOH, my optimism has yet to be validated. And, I'm no Elon.

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On 9/7/2022 at 1:16 PM, ICUMD said:

If population and population growth have anything to do with economic activity, then India is entering the golden age. 

 

Both India and Elon Musk are populating the world.

 

OTOH, my optimism has yet to be validated. And, I'm no Elon.

India is going to be an important power going forward and perhaps more important than China. That does not mean that Indian stocks are doing well though. For one thing, it seems that India’s entire economy is run by a few family chaebol like organizations. If they can’t democratize economic development, bad things will happen and it’s s question when, not if in my opinion.

India also made a mistake tying themselves to Russia. First, China now has an alliance with Russia and they are India biggest enemy (besides Pakistan which really can’t challenge India). Second it’s now abundantly clear that the dependency on Russian weapon is a serious weakness, because most likely the Russians can’t export much any more (they can’t even produce enough for themselves and sanction are crippling their industry) and second the weapons are garbage compared to western and most likely even Chinese weapon systems at this point.

 

So India can pivot toward the west or try to walk a fine line being a neutral state (which I think is more likely) but the cuddly relationship with the Russians really has no future.

Edited by Spekulatius
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  • 1 month later...
25 minutes ago, Vish_ram said:

Anyone here investing directly in India? I finally got my demat trading account setup.

i invest directly. I am a USC but also an OCI holder so that allows me to do it. did you have any specific question ?

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Mr Ambani puts me right off Reliance.  There are a number of great stewards in India to choose from instead.

 

Unsurprisingly some of the best companies have crazy valuations (e.g. Britannia).  I'm rusty on other valuations - but for Coffee Can you could do worse than other Consumer Staples like the Subsidiaries (Nestle India, Hindustan Unilever etc.).  Marico has always been impressive, though I'm not sure about post-Harsh management.  And perhaps Godrej Consumer?

 

For conglomerates, I'd start with Mahindra and Tata - they both seem in a good place management-wise, though this needs to be monitored, and hard to say if you go for the Parent Co or pick a 'best' subsidiary.  The Murugappa companies seem in a good place at the moment too.

 

I don't know if tech is too risky for a Coffee Can approach, but Info Edge and IndiaMART would seem decent places to start.

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Most so-called blue-chip companies in India has huge scarcity premium. They are always the obvious candidates for coffee-can portfolio, if you are comfortable with the valuations. 

 

A strategy that has worked in India is to create a a long-term portfolio of sector leaders as they are able t grow above 12-13% nominal GDP plus take market share consistently from unorganised to organised which got accelerated since GST. Examples Asian Paints, Titan, Astral, HDFC Bank, ICICI Bank, Divi's Lab, Pidilite, HDFC Life, TCS, Infosys etc. Again a lot of them are already at stretched valuations.

 

Bear in mind that the cost of trading, taxes and consistent INR depreciation (approx 4.5% annually since 1970's) one needs to generate at least 12-14% to get 5-7% USD denominated.

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Thanks thowed & PJM. 

This is what I've shortlisted for further research. 

 

RELIANCE
TCS
Infosys
Hindustan lever
HDFC
ICICI
SBI
CRISIL
CARE

Asian paints
Glaxo
Cipla
Sun Pharma
Aurobindo pharma
Lupin
Divis lab
Dr Reddy
Torrent pharma
Procter & Gamble Hygiene ..

Pfizer

ABB
Adani power
Tata power
Power grid
L&T
Adani ports

Siemens
Dabur
Dmart
Brittania
Nestle
ITC

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38 minutes ago, Vish_ram said:

Thanks thowed & PJM. 

This is what I've shortlisted for further research. 

 

RELIANCE
TCS
Infosys
Hindustan lever
HDFC
ICICI
SBI
CRISIL
CARE

Asian paints
Glaxo
Cipla
Sun Pharma
Aurobindo pharma
Lupin
Divis lab
Dr Reddy
Torrent pharma
Procter & Gamble Hygiene ..

Pfizer

ABB
Adani power
Tata power
Power grid
L&T
Adani ports

Siemens
Dabur
Dmart
Brittania
Nestle
ITC

Most seem to be NSE 50 stocks. why not buy the index

 

Personally i would avoid the adani group. consumer good companies are an avoid for me too ...growing low single digits and selling at 60 times PE or more. Pharma companies have a good domestic business, but their generics segment is a challenge.

 

ITC is a good candidate for research if you have no issues with cigarrette companies. ICICI bank is doing well too. Same for HDFC. These three could do 20% CAGR for the next few years in terms of growth

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I agree that if you are planning to buy the largest blue-chip companies, you would be better off buying the Nifty index or a large-cap mutual fund.

 

Indian investment should be more growth focussed. I think the real juice is within NSE 500 companies as you go into the mid-cap and small-cap companies that are leaders within their category. They are benefitting from many tailwinds such as domestic consumption, macro economic growth, govt led spending, exports (china+1 and now europe+1) and most importantly migration from unorganised to organised. Many of these companies are run by technocrats and founder led management who is growth focussed. They are not only penetrating deeper within their own categories but expanding into lateral categories. Examples of such industries is Plastic pipes, pharma, chemicals, exchanges etc. 

 

The financial sector is also looking very good now after years of pain and cleaning up the books. Many banks have large provisions on their balance sheet, have good deposit growth rates and finally credit growth is coming back. These three factors together will create massive tailwind, at least for next few years. Read some of the recent commentary from veterans such as HDFC Bank, ICICI and Kotak to understand how banking sector is in a very sweet spot. 

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India looks more like a bubble than a market worth investing. no doubt that money invested in China will move there, but it seems like the market is too small to absorb that much funds. I am guessing that as a whole those allocating now to India will do poorly.

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2 hours ago, Spekulatius said:

India looks more like a bubble than a market worth investing. no doubt that money invested in China will move there, but it seems like the market is too small to absorb that much funds. I am guessing that as a whole those allocating now to India will do poorly.

Have to disagree here. Any hard evidence or is it just an opinion? 

 

As for money flow, I believe India would do fine even without influx of money from foreign investors. I think the Indian markets have shifted from depending on FII (Foreign Institutional Investors) to domestic inflow. You can see from the changing shareholding pattern of Indian companies. Money in India is slowly moving in financial assets but has a long way to go. Again just look at the mutual fund, equity custodian data etc.

 

As for the underlying economy, apart from the domestic economy and associated growth, you can see a clear instances of some manufacturing shifting from China to India in sectors such as chemicals, pharma etc for many reasons, but pre-dominantly as global companies diversify their sourcing and dependance on China. Of course all this will take time but just an example - India exports $2b worth of APIs and China exports $20b, so a 10% shift means India can double the exports. There are many such categories, sectors and industries. To top it all, there is a strong government and leader (PM Modi) who is consistently bringing reforms that will provide boast to the economy. Of course, from my perspective thats the biggest risk as well. 

 

I agree that valuations looked stretched at index level but that has to do with scarcity premium and market structures, however as that evolves it will provide broader investment opportunities. 

 

Edited by PJM
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14 minutes ago, PJM said:

Have to disagree here. Any hard evidence or is it just an opinion? 

 

As for money flow, I believe India would do fine even without influx of money from foreign investors. I think the Indian markets have shifted from depending on FII (Foreign Institutional Investors) to domestic inflow. You can see from the changing shareholding pattern of Indian companies. Money in India is slowly moving in financial assets but has a long way to go. Again just look at the mutual fund, equity custodian data etc.

 

As for the underlying economy, apart from the domestic economy and associated growth, you can see a clear instances of some manufacturing shifting from China to India in sectors such as chemicals, pharma etc for many reasons, but pre-dominantly as global companies diversify their sourcing and dependance on China. Of course all this will take time but just an example - India exports $2b worth of APIs and China exports $20b, so a 10% shift means India can double the exports. There are many such categories, sectors and industries. To top it all, there is a strong government and leader (PM Modi) who is consistently bringing reforms that will provide boast to the economy. Of course, from my perspective thats the biggest risk as well. 

 

I agree that valuations looked stretched at index level but that has to do with scarcity premium and market structures, however as that evolves it will provide broader investment opportunities. 

 

It's an opinion. Consumer good companies like Hindustan lever seem to trade at nosebleed levels (50-60x earnings) and the big conglomerates trade at ~30x ballpark. that's very high given the interest rates being 6%.

 

of course this is a superficial analysis but I think one has to be careful assuming that GDP growth will translate into stock market returns.

 

It's probably a great environment for a private investor building something from the ground up, but the public market seems like it' s pretty rich. With India, there is also a fair amount of political instability adding some hard to quantify risk.

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Indian fund managers I follow seem quite positive for the next decade (having been less so for the past decade).

 

I know the classic argument is that India is too expensive (especially compared with much of the rest of Asia).

 

However, I spent much of the 10s being underweight the US because... it was too expensive.

 

My feeling is that the US and India are both expensive markets as they both have a number of outstanding well-stewarded companies.

 

Political instability?  What, unlike a country where the Capitol was stormed?  Or a country where they keep changing the Prime Minister?  I think it's a risk in most countries these days, sadly.

 

Separately I agree there's an argument for a good mutual fund if you can find one, especially if it's multi-cap.  It's probably an obvious thing to say that I think it's harder to make a coffee-can portfolio with small-caps, as there's less certainty about their longevity.  Which may mean that a small-cap subsidiary of one of the 'good' families might make sense.

 

Of course, I may be completely wrong - it's hard to pick countries - think how many people thought Tencent & Alibaba were untouchable!  But personally I'm happy to allocate part of my portfolio there.

 

 

 

 

 

 

 

 

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