How To Invest In India

If I could go back in time to the ’70s, I would invest in China. It’s been a little over 30 years since China opened its economy and the results are incredible!

Those who saw China’s potential early on, have been rewarded handily.

India, China’s western neighbor, taking a cue, opened its doors relatively recently in the early 90s. India too, has shown tremendous growth and to see where India might me in another decade, just look at China today! For those who missed the China train, India might be a good opportunity. Even Buffett thinks so!

How does one invest in India?

Taj MahalTo invest directly in Indian markets, you need to be a resident. India is yet to open it’s exchanges to outside investors. The next best option is to invest in Indian companies listed in the US stock exchanges called ADRs. Indian ADRs can be bought and sold as regular shares and of course bound by US market eligibility rules.

Here are some of the most popular Indian stocks that trade in Nasdaq and NYSE.

INFYInfosys is one of the largest technology services companies in India with over 122,000 employees with a presence in 33 countries. It has a market cap of over 41billion and had an operating margin of over 27% in 2010.

$100 invested 5 years back in INFY would be worth $188.07 today.
CTSHCognizant's market cap is half of that of Infosys', but with a lot of room to grow both being competitors in the BPO space. Cognizant's PE is much higher than that of Infosys at 34.58 as opposed to Infosys' 28.93.

$100 invested invested 5 years back in CTSH would be worth $273.24 today.
Also See: WIT, PTI
RDYDr. Reddy's Laboratories is a low cost manufacturer of generics pharmaceuticals. A major portion of its sales is from North America and Europe and recently was given approval by the FDA to manufacture and market the generic version of the popular allergy medication Allegra. DRL's other business segments include Pharmaceutical Services and Active Ingredients segment and Proprietary Products segment.

$100 invested invested 5 years back in RDY would be worth $243.63 today.
TTMTata Motors Limited
Recently there was a lot of buzz over the word's least expensive car - the Nano! Well Tata Motors is behind it! Tata is one of the oldest business houses in India with a lot of influence and capital to withstand market turbulence. Even though the automobile market is extremely competitive in India, Tata Motors is a name to reckon with. Tata Motors is also the largest automobile company in India manufacturing a range of automobiles from cars and trucks to SUVs and buses. It also a supplier of defense vehicles to the Indian military.

In the international arena, Tata Motors owns Jaguar and Range Rover.

$100 invested invested 5 years back in TTM would be worth $137.14 today.
TCLTata Communications Limited. Another Tata company! The telecom market it India is one of the largest and fastest growing in the world. TCL is India's main international long-distance provider. TCL operates in over 40 countries providing connectivity to over 200 countries and nearly a million square feet of colocation and data center space worldwide.

$100 invested 5 years back in TCL would be worth $53.87 today.
HDBHDBC was one of India's first banks to be privatized in 1994 by India's federal reserve, the Reserve Bank of India . HDBC is poised to take advantage of India's booming economy and real estate markets by providing financing and deposit services for its customers. Its business operations include credit cards, debit cards, ATMs, bill pay, housing loans, auto loans, brokerage services and banking.

$100 invested 5 years back in HDB would be worth $322 today.
Also See: IDB
MMYTMake My Trip is India's most popular online travel booking site similar to Expedia and Orbitz in the US.

Online booking is relatively a new concept in India and with rapidly expanding internet usage, MMYT is poised to take advantage of this market.

$100 invested at IPO August of last year would be worth $118.56 today.
Also See: REDF

The second option is to diversify and invest through India ETFs.

PINPowerShares India Portfolio
This ETF is designed to track the Indian markets in general through a group 50 Indian stocks tracking the Indus India Index ranging from information technology, health services, financial services, heavy industry and consumer products.
EPIWisdomTree India Earnings Fund
This ETF tracks the performance of Indian companies as determined by WisdomTree Investments.
INPiPath MSCI India Index
INP tracks the MSCI India Total Return Index that is made up of the top 68 companies by market cap as listed in India's National Stock Exchange.
0.89Financial Services
INDYiShares S&P India Nifty 50 Index Fund

The index tracks the top 50 Indian companies that trade in the Indian market and tracks S&P's CNX Nifty 50 Index.

Finally, you can also trade through US companies that have a significant presence in India or stands to benefit from India’s growth. For instance, the Illinois based company Caterpillar stands to gain tremendously from India’s poor infrastructure. Where others see a hurdle, Caterpillar sees opportunity.

Fast food is another area. Indians are taking a liking to fast food as dished out by McDonalds, KFC and Pizza Hut. Coke and Pepsi were one of the first to enter the Indian markets. And feeding a country of 1.2 billion is big business.

Disclosure: I own positions in PIN, TCL and CTSH

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21 thoughts on “How To Invest In India

  1. Great article! Being Indian I’ve always wanted to be part of the action. I’ll be taking a look at some of those ETFs for later years when I want to expand a bit in terms of holdinds.
    You’re absolutely right about the communications industry in India. At the moment it’s booming and they are rolling out 4G faster there then here in the United States.

    -Ravi Gupta

    • India’s mobile infrastructure is relatively new compared to the US, hence there are less legacy compatibility issues and easier and quicker rollouts.

      Works to India’s advantage. India also has the least expensive cell phone plans in the world.

  2. I’ve bought PIN for clients. The one thing holding India back is the bureaucracy. They are smart, hard working and want a higher standard of living.They just need to let the market work its magic IMHO. Nice post!

    • True DIY! I think it’ll happen. When Pepsi first entered the Indian market they had to team up with an Indian brand to market Pepsi. But gradually these restrictions were lifted and Pepsi no longer had to do a joint venture to trade in India! They bought their partners and became fully independent.

      Currently the same deal with the insurance sector. (That’s the reason Buffett is tying up with a local partner to sell insurance in India). But I’m willing to bet it is only a matter of time before India loosens up and Buffett does what Pepsi did! :)

  3. I like the article! People need to really take India seriously. There’s still tons of abject poverty there, really tough conditions for many – but there’s also a lot more money there now than before. The educational system is really good, and just look at how India has emerged on the scene in the business world.

    Somebody I knew flew into India on business recently (Bangalore, maybe) and said that the airport he visited was the better than any he’d seen in the U.S. That doesn’t happen without money.

    As for DIY’s comments go – agreed on bureacracy. The more free markets can be at play there, the more their growth and potential will be fueled.

  4. Great article. Have to seriously look at this. If this is the new China, have to get in near the bottom floor. Good points on infrastructure and fast food. Can the same be said for any material goods?

    • By materials if you mean Basic Materials like iron&steel, copper etc., yes – part of building the infrastructure.

      Another material which India directly influences is Gold!

  5. Thanks for putting together that list of Indian ETFs. The country has a fast growing economy, and is prone for new investment!

    • To minimize risk, ETFs are a better option. But different ETFs track different indexes – would be wise to dig deeper to see how the assets are allocated.

  6. Great list of companies to invest in. I think I will stick with ETF when investing in emerging market/foreign market.

    • Yes, if you have a disciplined, well planned asset allocation strategy, set a percentage for emerging markets and stick to it with regular re-balancing.

  7. I own both CTSH and INFY. Recently started looking in financial and telecomm companies. I didn’t think about ETFs. Should look into them… My mother bought HDFC shares 10 years ago, it has now become a LOT LOT higher, she just sold it for my sisters wedding. That covered a significant chunk of the expenses. If you have seen/been to an Indian wedding that is saying a lot.

  8. India has some ways to go compared to China, and the equity market seems to be more transparent and accountable than China’s. Good article!

  9. This is very interesting. I haven’t thought to look at the global economies of other countries, but I can definitely see India becoming the next China. Thanks for sharing the information on these companies. I’ll have to research this.

  10. Great article… I like how you lay out the ROI after 5 years for each stock…Id love to see that format more often.

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