Contemplating a sector bet: India

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MrPotatoHead
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Contemplating a sector bet: India

Post by MrPotatoHead » Sun Jan 07, 2018 9:52 pm

Gang,

I am contemplating a sector bet with the play money portion of my portfolio. I am underweight relative to what many may consider optimal at 15% international. My IPS indicates 15-20% broad based International adjusting when I vary by 5%, so I am at the lower limit of my tolerance range.

I am contemplating placing a sector bet (yep bet is the right word) on India. Once again this is play money in the form of 5-10% of the portfolio.

My rational is, the obvious demographics India presents but also the seeming dismal record U.S. companies have had (beyond Apple) of penetrating the markets there. Hence I am looking at companies that are native to India.

I am seeking the best way to add a sector bet in India. I would be interested in both options for taxable and non-taxable. I truly am adverse to complicating my tax return. 1/3 of my investment assets are tax advantaged and 2/3 are taxable. My holding period is undetermined as I have no need of the money now or likely in the future. But I seldom sell investments except to conform to asset allocation.

I figure BogleHead buddies interested in India have already done the the heavy lifting and am looking to leverage the research others have done before me.

Thank you.

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SimpleGift
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Re: Contemplating a sector bet: India

Post by SimpleGift » Sun Jan 07, 2018 11:04 pm

No special expertise on investing in India, but it may be worth considering that because India is now one of the fastest-growing major economies in the world, it's received a lot of attention in the financial press around the world. As a consequence, India's stock valuations have been bid up to fairly stratospheric levels, compared with other emerging market stocks in general (table below).
Not to discourage you from following your fancy with your play money, but I'd be concerned that future returns might be subpar, due to today's high starting valuations. Just my perspective.

DrGoogle2017
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Re: Contemplating a sector bet: India

Post by DrGoogle2017 » Sun Jan 07, 2018 11:37 pm

Gunglack was on CNBC recently, I remember he did mention India. I have it on my watchlist for now. I wouldn’t bet a huge amount. Maybe a small bet.

gwrvmd
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Re: Contemplating a sector bet: India

Post by gwrvmd » Sun Jan 07, 2018 11:48 pm

I have had an investment in India for about 10 years through a Closed End Fund: MS India. There is also another India closed end fund: India Fund, the MS India Fund has done slightly better. Closed End Funds are listed every Monday in the WSJ. (MS stands for Morgan Stanley)

It did well for a few years, then was flat for about 5 years due to a political situation in India, done well recently, up 45% in past year. A little risky, use only play money, its not a core investment but it has been good to me so far

Closed End Funds all sell at a 5% to !5% discount so don't let that scare you, symbol is IIF.......Gordon
Disciple of John Neff

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whodidntante
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Re: Contemplating a sector bet: India

Post by whodidntante » Sun Jan 07, 2018 11:52 pm

I've spent a few weeks in India and it's a country of remarkable potential, I agree. The thought occurred to me to overweight India. It's had great demographics for my entire life and major progress but so far has not fired on all cylinders. I already overweight emerging markets, and I would not further overweight India due to valuations as SimpleGift elaborated on.

larryslocum1982
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Re: Contemplating a sector bet: India

Post by larryslocum1982 » Sun Jan 07, 2018 11:58 pm

India looks expensive on pe. I want to diversify and learn to do more than my basic indexing. Why do you think India is a good investment. Are there any India newsletters or sites that you recommend?

Louverture
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Re: Contemplating a sector bet: India

Post by Louverture » Mon Jan 08, 2018 12:32 am

Research Affiliates has India as the likely worst-performing emerging market over the next decade--due to the sky high valuations that others have pointed out.

https://interactive.researchaffiliates. ... terms=REAL

They don't have a crystal ball, but it might give me pause before making a sector bet.

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MrPotatoHead
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Re: Contemplating a sector bet: India

Post by MrPotatoHead » Mon Jan 08, 2018 12:35 am

larryslocum1982 wrote:
Sun Jan 07, 2018 11:58 pm
India looks expensive on pe. I want to diversify and learn to do more than my basic indexing. Why do you think India is a good investment. Are there any India newsletters or sites that you recommend?
In my case part of it is, I know many, many H1Bs and immigrants who are voluntarily returning to India for the business opportunities there. They are taking their U.S. based first world skills and going back to India, often leaving family (the immigrants) behind in the U.S. To me that says something about what they perceive as the potential. I eschew most newsletter and avoid watching finance TV etc dismissing it as so much financial porn. In like ways I am bullish U.S., despite the valuations, because of what I see and hear from my clients and also bullish India because not only have my own employees walked away from low six figure salaries but so are many others that I know of.

It is just something I am kicking around. I usually don't place bets (I have but not in the last decade) but this had an innate appeal. I had not looked at the P.E. but rather it was the exits interviews with my staffers and the insight from HR at other companies that put this on my radar.

I must say the comments about PE give me pause; which of course is why I posted. I thank everyone for their input.

larryslocum1982
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Re: Contemplating a sector bet: India

Post by larryslocum1982 » Mon Jan 08, 2018 12:46 am

Would you mind sharing what you do?

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Runalong
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Re: Contemplating a sector bet: India

Post by Runalong » Mon Jan 08, 2018 1:19 am

FWIW (not much): I bought SIFY at the end of last year and it's up 43% ytd (4 trading days).

I've held SCIF for many years, it's been up and down but last year was pretty good and it's up over 5% already for 2018.

So, if there is a "January Effect" for Indian equities, your bet might be a good one in 2018.

"If... bet... might".

Valuethinker
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Re: Contemplating a sector bet: India

Post by Valuethinker » Mon Jan 08, 2018 3:48 am

whodidntante wrote:
Sun Jan 07, 2018 11:52 pm
I've spent a few weeks in India and it's a country of remarkable potential, I agree. The thought occurred to me to overweight India. It's had great demographics for my entire life and major progress but so far has not fired on all cylinders. I already overweight emerging markets, and I would not further overweight India due to valuations as SimpleGift elaborated on.
The reason you think it hasn't fired on all cylinders is because we now all think of China - 10% pa growth for something like 20 years from Deng's reforms in 1980.

But step back. India has grown at c. 5% p.a. ever since Singh's reforms (when he was finance minister) in the early 1990s. From a far less developed country than China was in 1980 (things like literacy etc.).

Britain in the Industrial Revolution is estimated to have grown at something like 1% a year.

India has actually done phenomenally well. Just not as well as China.

Infrastructure, and politics, are the big bugbears.

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SimpleGift
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Re: Contemplating a sector bet: India

Post by SimpleGift » Mon Jan 08, 2018 10:44 am

MrPotatoHead wrote:
Mon Jan 08, 2018 12:35 am
I must say the comments about PE give me pause; which of course is why I posted.
If one is patient, though, it does seem that emerging market stocks — including India stocks — regularly go on sale every few years (red arrows below), providing more reasonable buying opportunities for the long-term investor.
However, this could entail waiting a few years from now to invest, as the rapid growth story about India's potential is currently top-of-mind for many investors around the world today — as reflected in India's high current stock valuations.

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LiveSimple
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Re: Contemplating a sector bet: India

Post by LiveSimple » Mon Jan 08, 2018 10:51 am

Does Emerging Markets and International Small cover India. Is that not enough ?'

Difficult to answer, If India, why not Malaysia, Thailand, China, South Korea, Philippines, Ireland, etc.

Valuethinker
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Re: Contemplating a sector bet: India

Post by Valuethinker » Mon Jan 08, 2018 10:53 am

SimpleGift wrote:
Sun Jan 07, 2018 11:04 pm
No special expertise on investing in India, but it may be worth considering that because India is now one of the fastest-growing major economies in the world, it's received a lot of attention in the financial press around the world. As a consequence, India's stock valuations have been bid up to fairly stratospheric levels, compared with other emerging market stocks in general (table below).
Not to discourage you from following your fancy with your play money, but I'd be concerned that future returns might be subpar, due to today's high starting valuations. Just my perspective.
Sectoral composition has a big impact on the valuation ratios of Emerging Markets. There's often a lot of concentration.

For example, are India's banks listed? That would lower PE & P/book, normally (from memory the big banks are state held).

Also there is the Ambani factor (Reliance Industries). And the Tata one - the largest IT outsourcing business in the world (usually high multiple) is TCS.

I put these out there I don't have time to look them up today.

I agree that the multiples seem really high-- like tech stock multiples.

KlangFool
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Re: Contemplating a sector bet: India

Post by KlangFool » Mon Jan 08, 2018 10:59 am

https://en.wikipedia.org/wiki/Tata_Group
<<Tata Group is an Indian multinational conglomerate holding company headquartered in Mumbai, Maharashtra, India. It was founded in 1868 by Jamsetji Tata and gained international recognition after purchasing several global companies. It is one of India's largest conglomerates and is owned by "Tata Sons", a charity registered with the Charity Commissioner in India.[4][5]>>

OP,

Tata is one of India's largest conglomerates and is owned by a charity. So, before you invest in India, you need to understand Tata.

KlangFool

Engineer250
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Re: Contemplating a sector bet: India

Post by Engineer250 » Mon Jan 08, 2018 11:55 am

MrPotatoHead wrote:
Mon Jan 08, 2018 12:35 am
larryslocum1982 wrote:
Sun Jan 07, 2018 11:58 pm
India looks expensive on pe. I want to diversify and learn to do more than my basic indexing. Why do you think India is a good investment. Are there any India newsletters or sites that you recommend?
In my case part of it is, I know many, many H1Bs and immigrants who are voluntarily returning to India for the business opportunities there. They are taking their U.S. based first world skills and going back to India, often leaving family (the immigrants) behind in the U.S. To me that says something about what they perceive as the potential. I eschew most newsletter and avoid watching finance TV etc dismissing it as so much financial porn. In like ways I am bullish U.S., despite the valuations, because of what I see and hear from my clients and also bullish India because not only have my own employees walked away from low six figure salaries but so are many others that I know of.

It is just something I am kicking around. I usually don't place bets (I have but not in the last decade) but this had an innate appeal. I had not looked at the P.E. but rather it was the exits interviews with my staffers and the insight from HR at other companies that put this on my radar.

I must say the comments about PE give me pause; which of course is why I posted. I thank everyone for their input.
I wonder how much of that is changing approach to H1B visas. I believe the current administration has either already or is at least strongly considering limiting spousal visas to H1B visa holders, and no longer automatically providing a green card visa for those trying to stay and in the application process once the H1B visa ends. During the recession immigration from Central and south American countries dropped off substantially. It likely had more to do with the recession than stronger than normal economic opportunities in their home countries.
Where the tides of fortune take us, no man can know.

Topic Author
MrPotatoHead
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Re: Contemplating a sector bet: India

Post by MrPotatoHead » Mon Jan 08, 2018 10:35 pm

SimpleGift wrote:
Mon Jan 08, 2018 10:44 am
MrPotatoHead wrote:
Mon Jan 08, 2018 12:35 am
I must say the comments about PE give me pause; which of course is why I posted.
If one is patient, though, it does seem that emerging market stocks — including India stocks — regularly go on sale every few years (red arrows below), providing more reasonable buying opportunities for the long-term investor.
However, this could entail waiting a few years from now to invest, as the rapid growth story about India's potential is currently top-of-mind for many investors around the world today — as reflected in India's high current stock valuations.
Thank you for this. I am a patient man. I can wait and watch.

OkieIndexer
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Re: Contemplating a sector bet: India

Post by OkieIndexer » Tue Jan 09, 2018 5:12 pm

If theoretically you lose all the play money, what happens then? Play money should be a once in a lifetime thing, where you set aside X dollars from your portfolio to "play with," and if you lose it all, no more playing for the rest of your life.

Really "play money" is not a good idea, especially if you have gambling/addictive tendencies, but I do it myself, although with only 1.3% of my portfolio. My plan is if I lose the play money, I'll never do "play money" again the rest of my life. Hopefully I can stay the course on that.
"In bull markets, people say 'The more risk I take, the greater my return.' But when people aren't afraid of risk, they'll accept risk without being compensated." -Howard Marks, Oaktree Capital

cdtouchberry
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Re: Contemplating a sector bet: India

Post by cdtouchberry » Sat Aug 25, 2018 7:03 pm

I was considering a small cap ETF in India. There is a 10% tax now that was not there previously...
https://www.etftrends.com/new-tax-pulls ... pagination

MotoTrojan
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Re: Contemplating a sector bet: India

Post by MotoTrojan » Sat Aug 25, 2018 7:54 pm

SimpleGift wrote:
Sun Jan 07, 2018 11:04 pm
No special expertise on investing in India, but it may be worth considering that because India is now one of the fastest-growing major economies in the world, it's received a lot of attention in the financial press around the world. As a consequence, India's stock valuations have been bid up to fairly stratospheric levels, compared with other emerging market stocks in general (table below).

Not to discourage you from following your fancy with your play money, but I'd be concerned that future returns might be subpar, due to today's high starting valuations. Just my perspective.
+1. You don't win by picking which emerging market country will do the best. You win by picking which will beat expectations by the highest amount. I'd revisit your strategy. 5-10% is no joke either.

MotoTrojan
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Re: Contemplating a sector bet: India

Post by MotoTrojan » Sat Aug 25, 2018 7:55 pm

OkieIndexer wrote:
Tue Jan 09, 2018 5:12 pm
If theoretically you lose all the play money, what happens then? Play money should be a once in a lifetime thing, where you set aside X dollars from your portfolio to "play with," and if you lose it all, no more playing for the rest of your life.

Really "play money" is not a good idea, especially if you have gambling/addictive tendencies, but I do it myself, although with only 1.3% of my portfolio. My plan is if I lose the play money, I'll never do "play money" again the rest of my life. Hopefully I can stay the course on that.
This is why I suggest you set a % of contributions, not of total portfolio. Caps it and allows you to refill the bucket if/when it goes to zero.

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