Should India follow countries such as China, Norway, Singapore, UAE and set up it’s own Sovereign Wealth Fund?
Citigroup (C) may cut up to a fifth of its 450 branches in India. Moreover, Citigroup may move some of it’s ATM branches to less expensive locations.
One of the big benefits that Citigroup has in India is its brand name that comes from being a global behemoth. All the sub-prime news and cost cutting could affect it’s brand name negatively in India. Moving away from expensive locations certainly will also affect Citi’s brand.
Now this could be a good opportunity for domestics banks such as ICICI Bank (IBN) and HDFC Bank (HDB). It sort of levels the playing field for domestic banks a little when competing with foreign banks. The move also coincides with ICICI Bank opening a branch in New York in Citi’s home turf.
HSBC (HBC) seems to have already moved their ATM’s to less expensive locations. Check out the following excerpt from a blog by John Elliott at Fortune (July, 07):
HSBC seems to be finding it hard to survive in Indiaâ€™s increasingly costly bazaars. Almost unbelievably, the worldâ€™s fourth-largest bank has closed its ATM booth in central Delhiâ€™s prestigious Khan Market because, senior executives tell me, it does not consider it economically viable to pay the admittedly astronomical six lakhs of rupees ($15,000) rent a month that its landlord wants for the 150 square feet of potential retail space. It is moving its money machine, and its usually sleepy guard, to cheaper location, possibly in a nearby gas station that will be far less accessible for local shoppers and tourists who used the old ATM. The bankâ€™s customers can still use their cards to withdraw cash at a (rather luxurious) Citibank ATM just a few yards away from the former HSBC location, at no extra cost.
Can’t blame Citigroup for not paying these crazy prices during struggling times.
On a side note, Citigroup has a 9.27% stake in HDFC. Also, HDFC has a 21.99% stake in HDFC Bank (HDB). There have also been claims in the past that Citigroup will eventually buyout both HDFC and HDFC Bank after 2009, once liberalization occurs in the banking sector.
Full Disclosure: No position in any of the above listed stocks.
Just like the overall market, Indian ADR’s have struggled since 2008 rolled in.
Note: Videsh Sanchar Nigam Ltd. (VSL) is now called Tata Communications (TCL)
As far as I am concerned the only Indian ADR worth looking at this point is Sterlite (SLT). ICICI Bank (IBN) and HDFC Bank (HDB) are also worth considering but I would wait for a little better entry point.
As far as other ADR’s are concerned, I don’t see anything exciting at this moment. Let me know if you think otherwise. Any ideas would be welcome.
The recent launch of Wisdomtree India ETF (EPI) looks better than the India IPATH ETN (INP). Energy plays a bigger role in EPI and technology plays a bigger role in INP.
The Powershares India ETF (PIN) is about to launch as well. The ETF pick might end up being between Powershares India ETF vs. Wisdomtree India ETF.
Although the Indian markets have been hit by the turmoil here in the United States, India still remains an attractive investment destination. It’s certainly good to see the launch India ETF’s to give people more choices to invest in India.
Full Disclosure: I am long Sterlite (SLT)
The chart below tells us more than the performance of the US listed Indian stocks in 2007. What it tells us is just how strong the Indian economy is and the rise of the Indian consumer.
The companies that targeted the local Indian consumers and the local Indian market emerged as the clear winners in 2007.
Telecom and Banks led the way. However, technology companies that depend on western markets such as United Sates under-performed during the year.
The two Indian Internet plays, Sify (SIFY) and Rediff (REDF), are looking more like Lycos and Excite. These two stocks are showing no signs of life and I am not sure 2008 will be any better. Internet in India still hasn’t emerged as people expected it to. You can’t go just by numbers and growth figures. Broadband is still a dream for most consumers in India. I am planning to write about this topic soon so I will leave the bulk of my thoughts for that article.
Tata Motors (TTM) and Dr. Reddy’s (RDY) basically went no where but still look promising for 2008 and beyond. Tata is still waiting on the Jaguar and Land Rover decision and the Rs. 1 Lakh ($2500) car is supposed to be launched in 2008.
The newly listed Sterlite (SLT) has almost doubled since it’s IPO.
Now the best way to get exposure to Indian Market was via an Indian ETF or CEF’s. INP led the way with a 86% return in 2007.
Unfortunately, lots of great Indian companies are not listed in the United States and the best way to play the Indian market might as well be INP. However, with Sensex near an all-time high you want to time your entry well.
With the Indian economy booming and as the ever increasing middle class continues to see their purchasing power increase, investing theme for 2008 is pretty clear. Invest in Indian companies that target the local market rather then ones that depend on western markets.
2008: The year ahead
Find good entry points for:
- HDFC Bank (HDB)
- ICICI Bank (HDB)
- INP (ETF)
- Sterlite (SLT)
** Dividends not included
|Stocks||2007 % Gain|
|Videsh Sanchar (VSL)||98.00%|
|Sterlite Ltd. (SLT)||93.97%|
|IPATH ETNS (INP)||86.44%|
|HDFC Bank (HDB)||74.05%|
|Mahanagar Tel. (MTE)||53.93%|
|ICICI Bank (IBN)||46.39%|
|India Fund (IFN)||35.64%|
|MS India Fund (IIF)||8.01%|
|Dr. Reddy’s (RDY)||0.33%|
|Tata Motors (TTM)||-5.79%|
|Patni Computers (PTI)||-19.73%|
|WNS Holdings (WNS)||-47.43%|
* Dividends not included
Indian Stocks Weekly and YTD Price Change – Week ending December 07, 2007:
|Stocks||Weekly %||YTD %|
|Patni Computers (PTI)||9.33%||-12.68%|
|IPATH ETNS (INP)||9.28%||102.10%|
|MS India Fund (IIF)||9.15%||23.67%|
|Dr. Reddy’s (RDY)||8.27%||-6.02%|
|India Fund (IFN)||7.38%||42.59%|
|Sterlite Ltd. (SLT)||5.70%||106.85%|
|ICICI Bank (IBN)||5.40%||51.82%|
|Tata Motors (TTM)||4.12%||-2.90%|
|Mahanagar Tel. (MTE)||3.58%||48.48%|
|HDFC Bank (HDB)||3.16%||85.11%|
|Videsh Sanchar (VSL)||-0.18%||73.76%|
|WNS Holdings (WNS)||-10.95%||-45.34%|
*Dividends not included
Indian Stocks Weekly and YTD Price Change – Week ending November 30, 2007:
|Stocks||Weekly %||YTD %|
|Videsh Sanchar (VSL)||26.18%||74.08%|
|Sterlite Ltd. (SLT)||17.94%||95.68%|
|India Fund (IFN)||10.32%||32.79%|
|IPATH ETNS (INP)||9.85%||84.94%|
|MS India Fund (IIF)||8.03%||13.30%|
|Mahanagar Tel. (MTE)||7.46%||43.34%|
|Patni Computers (PTI)||7.29%||-20.13%|
|HDFC Bank (HDB)||7.16%||79.44%|
|ICICI Bank (IBN)||2.98%||44.04%|
|Tata Motors (TTM)||2.81%||-6.74%|
|Dr. Reddy’s (RDY)||1.68%||-13.20%|
|WNS Holdings (WNS)||-0.05%||-38.62%|