India looks good for medium term investment

WITH the war clouds looming large, the world of investment seems to be in a state of limbo. Adding to this woe has been a spate of poor corporate performance in developed world, few high profile bankruptcies and accounting scams.

By T Koshy

Published: Tue 18 Mar 2003, 1:19 PM

Last updated: Wed 1 Apr 2015, 9:05 PM

Now is the time for investors who are looking for value opportunities. A time to pick up shares at very good values.

To get returns in medium term you don't even have to be adventurous, in terms of investing in speculative and high risk ventures. Just look for few well established and well performing conventional companies. The chance of disappointment is really low.

What gives me this confidence? The same reason the prices are down today; the uncertainty around us. At times of uncertainty the investor looks for a high risk premium and it translates to a lower price for stock. This means that the investor is willing to pay a relatively lower price, compared to times when the uncertainty is low. Today we are surrounded by uncertainty, which leads to depressed prices.

There is certainly a very high probability that at least some sources of this uncertainty will get sorted out in the near future. This means better valuations, particularly in the Indian market.

With a GDP growth of around 5 per cent compared to an average of about 2 per cent for the world as a whole India has been one of the fastest growing economies in the recent past. And the projections for the coming years seem to be in the same direction.

The Corporate Sector in India has been performing outstandingly. When the general results from the corporate sector around the world has been filled with more bad news than good, Indian companies in the earlier era of protected markets had significant inefficiencies inherent in them. Now that they have been exposed to global competition, they have tightened their belts and released significant gains. During half year ended in September 2002 the net profit of the Indian corporate increased by more than 50 per cent. In the third quarter ended in December 2002, the results of the major 679 companies which released their results shows that the sales has increased by 70 per cent and net profit has increased by 15 per cent. With so much to go for India is a good bet for investment in medium term.