{"id":34269,"date":"2012-12-12T05:57:59","date_gmt":"2012-12-12T10:57:59","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=34269"},"modified":"2012-12-12T05:57:59","modified_gmt":"2012-12-12T10:57:59","slug":"are-indian-stocks-a-buy","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/12\/12\/are-indian-stocks-a-buy\/","title":{"rendered":"Are Indian Stocks a Buy ?"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

In terms of generating raw frustration among investors, India is a hard country to beat.\u00a0 It has the second-largest population in the world, but unlike number one China, it also has a young, English-speaking workforce.\u00a0 The country has a large and successful diaspora scattered across the globe and old trade ties that date back to the British Empire.\u00a0 It\u2019s democratic\u2026and has an Anglo-Saxon common law legal system.<\/p>\n

I could go on all day, but it wouldn\u2019t matter.\u00a0 Despite all of India\u2019s selling points, the country can\u2019t seem to get out of its own way.\u00a0 \u00a0Since independence from Britain, India\u2019s economic growth has so badly trailed that of China and several other East Asian economies that economists derisively called it the \u201cHindu rate of growth.\u201d\u00a0 In the early days of the Indian republic, the country copied the worst aspects of British bureaucracy and Soviet central planning and melded the two into a unique Indian \u201cself sufficiency\u201d model that virtually guaranteed economic stagnation.<\/p>\n

Even in more recent times, India has appeared downright hostile to foreign investment.\u00a0 Earlier this year, India\u2019s Supreme Court invalidated the licenses of several foreign telecom operators.\u00a0 The Court claimed\u2014and probably with justification\u2014that the licenses were granted illegally by a corrupt government minister, but the incident made many Western firms rethink their decision to invest in India.\u00a0 A deal isn\u2019t a deal there.<\/p>\n

Some of India\u2019s \u201cwins\u201d are actually losses in disguise.\u00a0 For example, India has embraced the information revolution better than any other major emerging market and has used the falling price of communications to create a thriving outsourced services sector.\u00a0 But one of the reasons that India was so quick to jump into the information revolution is that the country\u2019s \u201cold economy\u201d infrastructure (everything from roads to its sewage system) is so horrendously bad that competition with China in manufacturing is an impossibility\u2014even though Indian wages are significantly<\/em> cheaper than Chinese wages.<\/p>\n

I give credit to India\u2019s entrepreneurs.\u00a0 They operate in an environment that would cause most Western businessmen to lose their hair or drop dead of a heart attack as they look for creative ways to leapfrog the regulatory monster known as the Indian state.<\/p>\n

But lest anyone think that I am a perma-bear on India, not all news is bad.\u00a0 Prime Minister Manmohan Singh appears to have rediscovered the reforming zeal of his earlier years and has pushed through a much-needed reform of the Indian retail sector<\/a>.\u00a0 He tried opening the retail sector to foreign retailers once before, only to back down at the first sign of protest. Perhaps the prime minister has rediscovered his backbone as well as his talent for economic reform.<\/p>\n

\"\"<\/a><\/p>\n

Investors have taken note.\u00a0 Indian stocks, measured here by the iPath India Index ETN (NYSE: $<\/span>INP<\/a>)<\/strong> have spent most of the past two years in a bear market but have had a nice run since late November.<\/p>\n

Are Indian stocks a buy at current prices?\u00a0 That\u2019s harder to say.\u00a0 At 17 times earnings see (FT estimates<\/a>), Indian stocks are far from cheap, particularly when you compare them to Chinese and other emerging market averages.\u00a0 Chinese stocks are trading hands for just 8 times earnings, and Brazilian stocks just 14.<\/p>\n

It\u2019s hard to get wildly enthusiastic about Indian stocks based on valuations, but that doesn\u2019t mean that they can\u2019t have a nice run as investors rediscover the joys of emerging markets.\u00a0 I\u2019m bullish on emerging markets in general over the next 6-12 months, and I expect to see India participate in the rally.<\/p>\n

Just don\u2019t fall in love with Indian stocks, or they will<\/em> break your heart.\u00a0 If you decide to buy India, use a trailing stop to lock in your profits for the next time the Indian government does something characteristically impulsive and causes investors to lose interest again.<\/p>\n

Disclosures: Sizemore Capital has no positions in any security mentioned. This article first appeared on InvestorPlace<\/a>.\u00a0<\/em>\u00a0\u00a0<\/em><\/p>\n

The post Are Indian Stocks a Buy ?<\/a> appeared first on Sizemore Insights<\/a>.<\/p>\n

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