Rogers: If I were an Indian, I would invest in...

Feb 24, 2010

In this issue:
» Mumbai has the most expensive office location in the world
» Power is the new telecom
» Takeaways from the Railway Budget
» The sector in which India will outgrow China
» ...and more!!

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At a time when massive levels of debt, hyperinflation, manufacturing overcapacity and real estate bubbles are threatening to take the global economic superpowers back by a few years, there are really very few threats that have been associated with the Indian economy. But there is a unique problem that could derail India's biggest potential. That of water scarcity. Despite having ample fertile cultivable land and a conducive weather, water scarcity is hampering food cultivation in the country.

Water is an essential commodity. While most of us do appreciate this as consumers, who better than commodity guru Jim Rogers to emphasise on this? In an interview to a business daily, Rogers says "If I were going to buy something now, I would buy agriculture." Rogers believes that agriculture prices are still very depressed on a historical basis. He goes on to say "If I were an Indian, I would try to find the depressed commodities and buy those commodities because there is a problem of too much money printing around the world, not just in India but all over the world and many agriculture prices are still very, very depressed".

Despite having one of the biggest potential to cultivate agri products, poor yields have made agriculture unviable and unprofitable for a large number of farmers in India. A lot of this can be attributed to lack of adequate irrigation infrastructure and water shortage. In the absence of a credible, long-term strategy to boost agricultural production, the Indian government has resorted to draconian measures to tackle inflation. However, as Roger says, inflation is not the biggest threat. According to him, Water shortage is much bigger threat to the India story as compared to inflation.

 Chart of the day
At a time when the FIIs are doing their best to stamp their influence on the direction of Indian markets, there is someone quietly trying to foil their vicious motives. As today's chart shows, in FY09 insurance companies' investment into Indian equities was 5 times that of the mutual fund industry. While government owned LIC is the lead representative of the insurance industry, investors can take solace in the fact that there is someone doing the job of pension funds in India.

Data source: IRDA

Being a helmsman of India's largest mortgage lender for 16 long years is achievement enough. And on top of that if you pass through the period with a near unblemished record and earn the respect of your customers, your views are certainly worth listening to. Thus, when Deepak Parekh, the man we are referring to, spoke to a leading business daily, we thought it worthwhile to share with you some of his observations.

As always, Mr Parekh was critical of the builder politician lobby and reiterated his stance of having a real estate regulator. However, he did not buy the argument that property prices are high other than in few cities like Mumbai and Central Delhi and also asserted that non housing prices have in fact come down in the past few months. On liquidity, Mr Parekh opined that his company HDFC is facing no problem as it enjoys a stellar reputation in the market and investors are queuing up outside the doors of the company, flush with funds. He also took potshots at teaser home loan rates and called them a gimmick but later added that HDFC had to toe the line as it was losing market share. However, he further pointed out that his company was ensuring that sanctions happen only in cases where even if the rates rise after a couple of years, the borrower does not face a lot of strain. A good balancing act we should say.

It's official - Mumbai's Nariman Point is the fifth most expensive office location in the world. This is as per a study conducted by the real estate consultancy Cushman & Wakefield (C&W). In fact, Mumbai even beats other key office locations like New York, Moscow and Paris to the fifth spot. The list is led by Tokyo, London, Hong Kong, and Dubai in the first four places.

Data Source: The Times of India

As for domestic office rentals, Nariman Point outscores (and by far) other important locations like Connaught Place (Delhi) and the central business districts of Gurgaon and Bangalore. What is however also interesting is that Kolkata also finds a place amongst the most expensive office locations in India!

The person at the helm of private sector infrastructure financing firm in India has a very interesting opinion. In an interview to Wall Street Journal, Mr. Rajiv Lall, the MD of IDFC which finances nearly a fifth of PPP projects in the country, said "Power is the new telecom". Mr. Lall believes that the power generation industry in India has at last reached a tipping point. He believes that with better government regulations, smart financing and private participation, the sector can bring in plenty of new generation capacity to the subcontinent. For investors, this is an important takeaway in terms of getting a hint of the new growth areas. While the focus on power sector in the government's 5-year plans has been amply documented, the sector is set to outdo telecom on several fundamental parameters.

The Budget season has now kick started in full force. Ms. Mamata Banerjee began proceedings by presenting the railway budget today. Privatization of government companies has been doing the rounds off late. However, Ms. Banerjee has specifically stated that railways will not be privatized and will remain with the government. But she has appealed to the business houses to join hands for building partnership with the world's largest rail network. Other highlights include laying emphasis on providing passenger amenities besides introducing new railway lines (roughly 1,000 in next fiscal). Mumbai has also been on her agenda as the budget has talked about introducing 101 new suburban trains for the overcrowded city.

It is that time of the year again. Not a festival, but nothing short of one if you believe in the school of investing Warren Buffett has so successfully practiced over the years. Buffett's annual letter to shareholders is expected to come out this weekend. Most likely, he will devote some space for his acquisition of BNSF railroad. Besides the performance of Berkshire's 80 odd subsidiaries, he's likely to talk about his derivatives portfolio. Then there is the suspense over whether he'll name his successor just yet. Of course, there will be his trademark homespun wisdom on corporate and economic events. But some observers believe it won't have the same impact given the number of interviews the Oracle of Omaha has given in the recent past. As for us, we are not complaining. Given the priceless advice his letters have offered over decades, we await this weekend with great anticipation.

The Indian cement industry is poised to be the envy of the world in 2010. A global cement behemoth expects that its Indian operations will see a volume growth of over double the global average in 2010. As per a Business Standard report, French cement major Lafarge is aiming for a volume growth of 11% in 2010, a far cry from the expected global average of 5%. Infact, it expects more growth in Indian even compared to China, a country that usually comes out on top by a wide margin when it comes to anything involving 'growth'. In line with these sanguine expectations, Lafarge is in the process of aggressively adding capacity. It also plans to become a pan Indian player by moving beyond its current regional operations. With India's towering infrastructure needs, looks like the best days for the Indian cement industry still lie ahead.

Budget anticipations seem to have kept investors very edgy as the benchmark Indian indices kept oscillating to either side of yesterday's close through most of the session today. The benchmark index, the BSE-Sensex was marginally up by around 33 points (0.2%) at the time of writing, while its smaller peers, the BSE- Midcap and the BSE- Smallcap indices shed gains. They were down by around 0.2% and 0.5% respectively. Stocks from the auto sector continued to bear the brunt of investor apathy.

 Today's investing mantra
"Easy does it. After 25 years of buying and supervising a great variety of businesses, Charlie and I have not learned how to solve difficult business problems. What we have learned is to avoid them. To the extent we have been successful, it is because we concentrated on identifying one-foot hurdles that we could step over rather than because we acquired any ability to clear seven-footers." - Warren Buffett

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2 Responses to "Rogers: If I were an Indian, I would invest in..."


Feb 27, 2010

good reading indeed! in-depth ideas on national/global financials,commodities.... good charts, horizon specific notes, keepit up


Capt s k kapur

Feb 25, 2010

i always read 5 minute wrapup and find it very informative. The problem is that i can not read it fully as RIGHT margin is less by a few inches and many words are not readable.
This is going on for quite some time. How come its not noticed by you all on your own till we point out?

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