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Are Stocks from India Worth Your While? (Part 2)

4 October 2007 - Features - Editor

Are Stocks from India Worth Your While? (Part 1)

Fiscal arrangements between the federal (called ‘central’ in India) government, and State administrations, remain matters of contention (Shah, and Thomas, 2003). Stocks of all companies, which have large dealings with government bodies, as well as of entities, which continue to be owned in part by government, tend to show abrupt movements that cannot be explained in rational terms.

The upshot is that standard financial analyses of financial statements will not tell complete stories about the values and trends of individual stocks. The best investing behavior calls for awareness and experience of local business conditions, and have the key linkages on which companies depend. Significantly, the government is the largest single purchaser of manufactured goods produced by the largest company whose stocks are traded in Exchanges. Besides, sectors such as Telecommunications are heavily regulated in terms of prices and licensed areas of operation.

Diversity Competence Helps Indian Stocks Yield Cash

Yawning disparities and inadequate social development (Mozoomdar, 2002) are factors which investors in stocks should not ignore in India. Economic growth is highly concentrated in some urban centers, while large swathes of the agrarian hinterland remain in stagnant and almost medieval states. Companies have to be able to work very different market segments simultaneously in order to continue to service their stocks. Niche markets can mature quickly, disappointing investors. The volume attractions of the sub-continent depend on corporate capabilities to straddle all available price points, and to transcend the different social and economic strata which coexist within the same national boundaries.

The stability of India’s economic growth is the subject of some debate (Mozoomdar, 2002) though there is broad consensus on the long-term prospects of the country becoming a leading economy of the world. Executives and investors must both be flexible in their professional behaviors, responding rapidly to changing circumstances, and to different kinds of customers as well. Religion and caste are important but unusual influences on commercial matters (Harriss-White, 2003), which executives from other markets may not understand. A broad appreciation of these nuances is vital for effective functioning in the country.

Sure Shot Stocks from India

No country is entirely free of uncertainties in terms of how their stocks behave over time, so the fluctuations and special conditions of India should not be matters for any special concerns. In fact, the country has a broad range of widely admired companies (Asia’s Best Companies Poll Results, 2004). The country has built a most enviable reputation for Information Technologies, and has also achieved salutary growth in sectors such as automobiles, which are nearly stagnant elsewhere. Investors from other countries will be reassured to know that corporate governance and dividend-paying records are impressive for the best corporations (Asia’s Best Companies Poll Results, 2004). Foreign financial institutions are already important stakeholders in India’s economic development, and the days are not far off when individuals from all over the world will be able to buy and sell stocks on the nation’s Exchanges.

 


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