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 India’s increasingly costly bazaars. Almost unbelievably, the world’s fourth-largest bank has closed its ATM booth in central Delhi’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 bank’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.

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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.

ETF’s/ETN’s/CEF’s

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)

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Following are the key points from the article:

• Indian Banks have minimal exposure to subprime debt. 
• The recent curbs by the government on overseas funding will drive growth in the current fiscal year.
• “With companies forced to seek more funding at home, banks will be able to keep interest rates firm and improve asset quality by booking more blue-chip corporate loans — allaying worries about an upturn in bad consumer loans”
• Analysts and fund manager believe Indian Banks could see 20% upside in the next 12 months. 
• Indian companies can only borrow up to $20 million from the overseas markets in one financial year.  Also, they will need permission from the Central Bank and show they require funds for expenditure needs.
• ICICI Banks (IBN) was mentioned as a pick by one of the analysts. 

I have been recommending both US listed Indian Banks, ICICI Bank (IBN) and HDFC Bank (HDB) for a long time and see no reason to stop now.  These should be part of your key long term holdings and provide international exposure to your portfolio.  The key right now is to find a good entry point with the way the market is acting right now.  Any major downside should be considered an opportunity to start building a position small portions at a time.  I myself plan to do the same.

* No position in HDB or IBN

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The best way to invest in the Indian economy is via the two India banks HDFC Bank (HDB) and ICICI Bank (IBN) and the India based ETF (INP).  All three have roared back along with the Sensex after going down with the overall market.  Being patient and finding a good entry point is the key here. 

* No position in HDB, IBN and INP.  Subject to change anytime. 

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Let’s look at the performance of Indian stocks from last week:

The thing is that you can expect the Sensex to go down just as swiftly as it went up last week. 

The stocks and Funds I am targeting for now are:   

• ICICI Bank (NYSE: IBN)
• HDFC Bank (NYSE: HDB)
• Indian Fund (NYSE: IFN)
• MS India Fund (NYSE: IIF)
• IPATH ETNS (NYSE: INP)

I also like:

• Tata Motors (NYSE: TTM)
• Infosys (NYSE: INFY)

I consider all of above mentioned companies to be blue chip stocks and would love to invest in them for the long term. 

I am definitely going to keep an eye on both the Indian banks IBN and HDB and also INP which is an ETF. 

* I don’t own any of the stocks mentioned above. 

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Here’s my list of Indian Stocks (in no particular order): 

• HDFC Bank (NYSE: HDB) and ICICI Bank (NYSE: IBN) are two of India’s largest private banks and have been on a tremendous run for a while now.  They have both taken a small hit not only due to the market downturn but also because of the Indian Budget which was just released.  After my recent visit to India I am convinced that this is one sector I definitely want to be part of during these booming times.  I am planning to write a separate column about my trip and the banking sector.   I recommended both of these stocks last May but for some odd reason didn’t but them myself.  Trust me, I am still kicking myself for it.   
• Infosys Technologies (Nasdaq: INFY): I don’t think Infosys needs any introduction.  Another stock that has taken a big hit this week. 

Click here to go to the original article

* Full Disclosure: I am long STP, FTEK, UA, AMSC.  I don’t have positions in BA, HDB, IBN, INFY or SIRF.

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Highlights:

• 30% rise in net profit to Rs 239.30 crore in the first quarter ended June 30 compared with Rs 183.53 crore.
• 60% growth in total income to Rs 1,855 crore
• Net interest income for the first quarter increased 56.1% to Rs 817.6 crore, while the net interest margin remained unchanged at 4%.
• Other income stood at Rs 350.79 crore, an increase of 33.10% over Rs 263.55 crore on June 30, 2005
• Fee income grew 35% during the first quarter to Rs 290.6 crore.
• Paresh Sukhtankar, country head – credit & market risk, HDFC Bank said, Rising yields have been a concern. This has resulted in an impact on the valuation of our corporate bond portfolio.
• Total advances grew 47% to Rs 40,560 crore from Rs 27,591 crore in 2005-06Retail loans, which constituted 56% of gross advances, stood at Rs 23,121 crore.
• The bank’s deposits stood at Rs 60,630 crore on June 30, up 58.1% over Rs 38,354 crore on June 30, 2005.
• Net non-performing assets remained unchanged at 0.4%, while gross NPAs stood at 1.25%
• The bank’s branch network increased to 535 outlets in 228 cities as against 495 outlets in 217 cities in June 2005
• of June 2006, the number of debit cards issued by the bank crossed four million while credit cards issued touched the 2.5-million mark.

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Money Control: HDFC Bank (Nyse: HDB) launched a service that allows non-resident Indians (NRIs) to send remittances online through the Reserve Bank of India’s real-time gross settlement system (RTGS). Senior Vice President, Retail Banking, HDFC Bank, Shyamal Saxena said, “Through Quickremit, the bank’s NRI customers will be able to credit funds directly to the beneficiary’s bank account even in other banks, as desired by the remitter.” This facility is available for NRI’s from US, UK and Singapore. The amount will get credited latest on the same day or max to the next day, the process which used to take three days has become much simpler now with this new facility.

HDFC has realized the potential of NRI banking, after being a one of the domestic leader it now wants to focus on this segment for additional revenue. Currently ICICI Bank along with Remit2india.com dominates this sector. Of about $22 billion inward remittances in 05-06 about 2.5 billion were sent through online services and this is a big amount for any bank to pay some extra attention.

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Business Standard: This could well put a brake on the great Indian dream of buying a home. Reserve Bank of India (RBI) has classified home loan as an exposure to real estate sector in respect to banks giving the loan. With this it has put a cap on the frenzied growth of home loan sector for the banks. Real estate is one of the three sector which is classified as sensitive with respect to banks, other two are commodities and capital market.

This decision will hit most to the banks which have recently been very aggressive in home loan lending like ICICI Bank (Nyse: IBN). It is the number one player in this sector along with HDFC bank (Nyse: HDB). ICICI Bank alone disbursed Rs 25,740 crore of home loans in 2005-06, which took its outstanding home portfolio as of March 31, 2006 to over Rs 40,000 crore. The RBI has not recommended any cap for banks exposure to these sectors but left it to the respective bank boards to decide the limit on their own.

It now needs to be seen how much cap will these banks put and what effect it will have on their overall lending and growth. Housing was recently a big growth driver specially for these private banks with rising income people were ready to take home loans on EMI basis and this was proving to be a steady income for the banks.

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TimesofIndia: HDFC bank (NYSE: HDB) the second largest player in home loan segment has increased the home loan rates by 1 % and its now @ 9%. Along with HDFC bank, ICICI bank (NYSE: IBN) one of the largest home finance player has also increased the home loan rates to 9.50 %.

The rate increase was due to robust demand for housing and bullish outlook for infrastructure. The reality sector in India is still at a nascent stage and there is huge scope for growth. This can be seen from this simple data: The mortgage GDP ratio in USA for the year 2001 was at 54% in comparison to the mortgage to GDP ratio in India was at 2.5%.

HDFC and ICICI banks are the best bets to capitalize in India’s booming realty sector.

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