Forex Trading – Why Now’s The Time To Profit In India
Investors are once again turning their attention overseas. The US Dollar is crumbling in value. And, the global recession appears to be near an end. While the US markets are up nicely, it’s nothing like the returns we’re seeing overseas.
One area of hot growth before the recession was India.
Smart investors riding this red hot economy were making money hand over fist. From 2003 to 2006, the market tripled in value… then doubled in value again in less than 18 months.
Investing in India’s like throwing gasoline on a backyard BBQ. It’s spectacular and scary all at the same time.
Risk taking is catching on again.
Investors are looking for big returns. India’s showing some interesting economic data. The Bombay Sensex is up 68% year to date.
Some think India looks like a great place to invest… could they be right?
India is one of the fastest growing economies in the world. Just look at their GDP growth over the last few years.
In 2005, it was over 7%.
GDP growth was over 9% in 2006, 2007, and 2008.
But, the country is estimating 2009 growth around 6%.
Should we be worried?
While any slowdown in economic growth gives me pause, remember investing in everything is relative. What do I mean by that? Simply, looking at numbers in a vacuum is worthless. We need to know how these GDP numbers compare to others.
For example, the US GDP estimates for 2009 are downright sad. Right now, estimates for the US are for a contraction of nearly 2%. The UK, and EuroZone are also estimating negative GDP rates for 2009.
Taken in this context, India’s GDP growth rate is downright amazing.
So, the drop in India’s GDP doesn’t scare me.
What scares me is runaway government spending. The Indian government recently announced a $210 billion budget. A lot of it is earmarked for social welfare programs. It increases total spending some 16% from the prior year.
It also increases the federal deficit to the highest levels in 18 years!
I’m not alone in my fear. The day the budget was announced, the Bombay Stock Exchange fell 5.8%. Clearly, Indian investors are also concerned.
There’s also another problem with India.
No one seems to know what the government’s stance is on international investment.
Right now is a critical stage in India’s development. They need to open the country to more international investment. They need to attract corporations and encourage expansion into their country. Without it, growth rates will slow.
This is an important unresolved issue… but not the only one.
India also has problems with their sovereign debt ratings. When the budget was announced, several ratings agencies started looking closely at India’s debt. If these debt instruments get downgraded, we’ll see money flow out of the country.
Clearly, investing in India’s not a slam dunk.
India’s economy is growing fast… but problems with debt ratings, government budgets, and international investment have some concerned.
Personally, I think the potential rewards are worth the risk. One easy way to capture the growth in India is with a country ETF. The iPath MSCI India Index ETN (INP) offers broad exposure. It’s comprised of 60 leading Indian companies.
Since the lows set in the first quarter, INP is up more than 100%. This is a great return but it still has more room to run.
I happen to also like the Indian currency – the Rupee. I think it’s poised for a big move higher. Savvy currency investors should look closely at this opportunity.
Category: Currency Trading
