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India's Stock Market: The Verdict

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India's Stock Market: The Verdict

Tuesday, 24 July 2007

For all of their hand wringing and misgivings about the market's current valuation, the bears concede that the Indian market is not in a China-style bubble. And India's companies operate in a real financial economy where credit and risk matter --
in contrast to China where state-owned enterprises are kept afloat by over $1 trillion of bad-debt in the Chinese banking system. And the size of India's emerging middle class makes domestically driven basic sectors like banking one of the biggest no-brainer investments around. Consider that a leading bank in Greece (population 10.7 million) has a market capitalization of 25% higher than its counterpart in India (population 1.1 billion) These wild discrepancies cannot last.

On the other hand, the bulls underestimate the impact of the strong rupee and the shortage of skilled labor, both of which are changing the rule of the game in India's iconic outsourcing industry. The stronger rupee and rising wages for skilled workers in India means that the outsourcing megatrend has unquestionably weakened. That means slower growth ahead for India's IT sector.

The bottom line? The prospects for India's stock market are strong. Yes, the market will have its hiccups, but in the long terns, India's bulls will prevail.

Sincerely,
Nicholas A. Vardy

Editor, The Global Guru

Source: Global Bull Market

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