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India: The future is here!

Dec 23, 2009

BRIC nations - Brazil, Russia, India, and China - are seeing a higher share of global investments coming their way. This is if one is to believe a report in a leading business paper today. As it suggests, global fund managers are increasingly looking at these economies for higher returns.

The report cites EPFR Global a tracking agency for global fund flows. Its stats show that BRIC-focused equity funds have already seen inflows of US$ 20 bn during the first nine-months of this year. Importantly, this is almost 40% of funds of all emerging market stock funds.

Such large fund flows into BRICs are not without reason. Stockmarkets in these countries have risen sharply over the past 12 months. The MSCI BRIC index is up almost 90% in 2009 as compared to 70% gains recorded by the MSCI EM (emerging markets) index.

Apart from the promise of better returns, and as compared to developed markets, the BRIC economies also promise a better economic future for the coming few years.

Take for instance India. Since economic liberalization set in during the mid-1990s, Indian companies have grown strongly year after year. We have not only seen the emergence of some 'Indian multinationals', but have also seen several mid and small size companies raking in big growth over these years.

While the IT and pharma sectors gave the fillip to growth at the start of this decade, new and emerging sectors like logistics and retailing are eying big gains from the future. The Indian consumer seems to have come off age and is consuming like never before. Of course, this has not meant that household savings have fallen as consumption has risen. Savings have in fact increased for the Indian middle class, largely owing to rising family income levels.

And it this big opportunity - rising middle class savings and consumption - that the foreign investors are look as key reasons to bet on India.

Now, how much of this foreign money is long term in nature is doubtable. But what you, the Indian investor, can take advantage of are these very opportunities that the foreigners are vying for. It is not important to invest like the FIIs are doing, or invest when the FIIs are doing. The key for you is to picking up good quality stocks that are available at cheap valuations and hold them through market cycles.

But you have to have this conviction that the coming decades are going to be extremely bright for India. And in the next 10 to 20 years, if you stay invested in the right kind of stocks, you will be glad that you pulled the trigger. Happy investing!

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