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What does 'The Tale of Two Indias' mean to you?

Feb 2, 2015

In this issue:
» Key takeaways from the 2015 Equitymaster Conference
» India Inc. needs to hedge foreign currency risks
» Will FDI from the US improve further?
» ...and more!

On 31st January 2015, guests from 52 cities across the country and even from places like Riyadh, Oman, Dubai and Abu Dhabi joined us at the grand Taj Mahal Palace & Hotel in Mumbai. They were here to attend the second edition of the Equitymaster Conference. Given that the 2014 conference was such a huge success, the 2015 conference promised to be even better. And better it was if the strong turnout was anything to go by. But that is not all. The main theme of the conference was 'A Tale of Two Indias'. A wide range of topics ranging from stocks, commodities, real estate and other asset classes were discussed.

Equitymaster Conference 2015 - A Tale of Two Indias

The day began with Keynote Speaker of the Conference Mr. Ajit Dayal giving the big picture view on the Indian Economy and the Indian stock market. He talked about how the big event in 2014 was the general elections and the Modi government coming into power. But was he elected because the people of India believed that he and is team is capable of taking India's growth or development to the next level? Or was the BJP elected because people were completed disgusted with the UPA government's misrule?

Ajit also talked about the increased level of interest that foreign investors were showing for India. This is completely different from the scenario in 2013. Indeed, at that time, India's GDP had considerably slowed down and the rupee had tanked against the US dollar. The BRICs nations were labeled as the 'Fragile Five' and India was considered as the worst of the lot. Fast forward to 2014, post the elections, and foreign investors a singing a different tune altogether. India has emerged as the hottest investment destination.

Ajit Dayal explaining why India is 'TINA'

In the meanwhile, central bankers are increasingly resorting to loose monetary policies. Interest rates in the US remain low. Japan continues to experiment. And the ECB recently announced a gargantuan bond purchase program. Russia is faltering on account of the dramatic drop in oil prices and sanctions. Thus, are investors making a beeline for India because of increasing growth visibility or as Ajit put it, TINA? That is There Is No Alternative?

Ajit also believed that now is the time for the Modi government to walk the talk and get the reforms process underway if investors are to keep having faith in the India story.

Emergence of smart cities and the key megatrends that investors that can profit from were the other interesting topics of discussion. With emphasis on government's goal of creating 100 "Smart Cities" in India, this one change could actually be a game changer for economy and could add yet another India to India's GDP! However, it's not just the Smart Cities, but the 7 Megatrends trends in India's economy that investors can hugely benefit from.

Real estate was one theme covered very aptly by an astute and experienced realty investor Mr Ashwin Ramesh. He talked about real estate environment in Mumbai, Delhi and Bangalore besides touching upon cities such as Hyderabad, Chennai and Kolkata. Mr Ramesh also gave his insights into the commercial property market. Basically, in his view, considerable hurdles and bottlenecks in the availability of free land is one of the biggest reasons why real estate prices are not coming down. Ultimately, he emphasized how important it was in real estate and property to base your investment decisions on what lies within your competence and what you can manage.

Wealth coach Mark Ford had some very interesting insights on his experiences in India and around the world. He shared how he began numerous businesses over the years around the world and what makes him pick one business opportunity over the other. He also talked about how his publishing business has evolved over the years and how it went through a massive change with the growth in technology, and in turn, multiplying the profits manifold. Mark also talked about the manufacturing business and what interested him was a business focusing on the manufacturing of ideas. Ajit joined him in the discussion and shared how individual entrepreneurs could be the driving force behind as we move towards the "New India".

Thus, the discussion on Tale of Two Indias aptly highlighted the growing opportunities in a New India, including the likely challenges that investors could come across. We believe the conference participants went back with enough concrete ideas to create an actionable investment plan for 2015, and beyond. We understand that there could be numerous reasons for so many of our readers who could not make it to the conference this year.

However, we have the next best thing for you!

Just as last year, we're going to record the complete conference and make it available for you in an Exclusive 4 DVDs Pack. So, why wait,book your copy right away.

In the end, we would again like to thank you all for an overwhelming response!

What according to you could be the game changing investment opportunities in a New India? Let us know your comments or share your views in the Equitymaster Club.

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The RBI is certainly worried about the reckless money printing practices of central bankers. And what is making the Indian central bank worry even more is that corporate India is not taking enough steps to hedge from foreign currency risks.

Indeed, should the US Fed begin raising interest rates this year, there is quite a likely possibility that foreign investors would pull out money from India. Especially if growth in India does not begin to take shape. As Ajit stated in the Equitymaster conference, during times of crisis, foreign capital always looks for a reason to go back home. And a rate hike in the US could very well see some money, if not all, go back to the US.

Thus, while the RBI and the government can work towards improving fundamentals, corporates need to increase their hedge ratios to be better prepared for any turmoil in the exchange rate. The RBI on its part, is also reducing its dollar purchases in the forward market, so the cost of hedging comes down for corporates. So whether India Inc. will pay heed to the RBI remains to be seen.

We believe the RBI is quite right in adopting a cautious approach when it comes to volatile foreign money due to QE. Western leaders believe it is the only option to revive their economies. In this scenario, it is interesting to note that renowned economists are now speaking up against QE. Emeritus Professor of Economics at Harvard University, Dr. Martin Feldstein believes that QE alone won't save Europe. Without structural reforms, the continent may not experience an economic recovery similar to the US. Then we have Thomas Piketty who believes the Europe should learn from Japan. The Japanese have been printing money for over two decades but it hasn't revived their economy. While it is heartening that QE has it fair share of high profile critics, we are not confident that their voices of reason will be heard.

  Chart of the day
Speaking of the western world, we thought it would be interesting to have a look at the US-India economic relations in the wake of the US President's visit to India. As the chart shows, America's share in FDI inflows to India has improved. The US has historically been the world's biggest source of foreign investment. With more deals being signed recently, we can expect this share to improve. The fall in the Rupee against the Dollar, in 2013, has also given a boost to India's exports to the US. The US bound exports have been rising as a share of India's exports. In the US, India seems to have a stable economic partner.

Will FDI from the US improve further?

In the meanwhile, Indian stock markets made inroads into the positive territory after languishing in the red in the morning session. At the time of writing, the BSE-Sensex was trading higher by about 73 points. Stocks across the board were trading firm with those from the IT, banking and consumer durables spaces leading the pack of gainers. Mid and smallcap stocks did better notching gains of about 1% each. Asian markets were trading mixed, while most European indices were trading in the green at the time of writing.

 Today's investing mantra
"There's no reason we should become fearful if a stock goes down. If a stock goes down 50%, I'd look forward to it. In fact, I would offer you a significant sum of money if you could give me the opportunity for all of my stocks to go down 50% over the next month." - Warren Buffett

This edition of The 5 Minute WrapUp is authored by Radhika Pandit.

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1 Responses to "What does 'The Tale of Two Indias' mean to you?"

john diwakar

Feb 6, 2015

it is a historical event

Like (1)
Equitymaster requests your view! Post a comment on "What does 'The Tale of Two Indias' mean to you?". Click here!
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