Climb Aboard India's Raging Bull

RealMoney by TheStreet.com Climb Aboard India's Raging Bull Wednesday March 16, 12:00 pm ET By Charles L. Norton, RealMoney.com Contributor "'Emerging markets' may be a euphemism, but it is also a declaration of hope and faith. Although some of the stock markets of developing nations may sometimes seem 'submerged,' they are generally emerging into bigger and better things." ADVERTISEMENT -- Mark Mobius, Templeton Emerging Markets Group. While most U.S. investors are focused on things like Bernie Ebbers' perp walk and the management upheaval at Disney (NYSE:DIS - News) and AIG (NYSE:AIG - News), they're missing a raging bull market. But it's not here. It's in India. Here are the highlights: In the past nine months, the country's benchmark Sensex 30 Index has soared around 44%, near a new all-time high, and its economy is ripping. A few weeks ago, the Reserve Bank of India, India's central bank, said that it would allow overseas investors to acquire greater stakes in some non-government banks in an attempt to attract foreign capital to the Indian banking sector. There have also been reports that India may permit overseas investors to own a stake in local newspapers, magazines and journals. Plus, rules regarding foreign investment in local telecommunications companies will likely be eased as well. All this means one thing: capital is flowing into India. Ashok Jha, Secretary of the Department of Industrial Policy and Promotion, last week said that foreign direct investment, as defined by the International Monetary Fund, is estimated to be around $7.5 billion to $8 billion this year, which represents a 60% to 70% increase from the $4.7 billion of foreign direct investment India witnessed last year. And it's no wonder: Growth in India is expected to be 6.9% for the year ending March 31, making it among the fastest-growing economies in the world. But economic growth could be even greater next year. Finance Minister P. Chidambaram has been a busy man recently. A few weeks ago, he requested the central bank keep interest rates benign and intimated that 7% to 8% growth would be favorable. "Growth remains the paramount objective," he said. In addition to counseling the central bank on accommodative monetary policy, last month he proposed a reduction of the corporate tax rate to 30% from 35%, and presented a burgeoning budget. Government spending is set to increase on its infrastructure such as roads, ports and the like. In addition, a change in Indian patent law from one that includes only process protection to one that covers product protection went into effect on Jan. 1. That will nurture innovation and entrepreneurship. Feeding the Beast With a pick-up in spending on infrastructure and a more fertile entrepreneurial environment, India looks like it's on the cusp of a borrowing boom. The world's second-most populous nation is home to one billion people who are beginning to fall in love with something we Americans have been attracted to for many years: credit. Indian consumers are becoming less apprehensive of credit, financing homes, cars and using credit cards like it's going out of style. The expanding economy, primed to continue to grow, bodes well for Indian business, and institutional investors have been taking note. For example, Calpers, the largest U.S. pension fund with assets of more than $180 billion, added India to its list of permissible emerging equity markets last April. Continued.. http://biz.yahoo.com/ts/050316/10213453_2.html