The country is set to capture 1% of global trade soon, while merchandise exports have grown an average of 24% a year over the past four years, according to Economy Watch. Goldman Sachs predicts India will rise to be the third largest economy in the world by the year 2035.

But India is a country where progress meets poverty, and new ideas meet with old traditions.

By all measurable standards, India has a long way to go before its economy matures.

Two-thirds of Indian workers are employed in some aspect of agriculture. And almost 30% of Indians live below the country’s poverty line.

When one of my co-workers returned from a trip to India last year, he described in detail the country’s changing landscape. It’s a place where brand new highrise buildings abut a dirt road and a field of farm workers and cows, he said. It literally is a land where high-tech meets low-tech.

This is the kind of parody I found when researching the impact of the Internet on India. Only in a place like India could a centuries-old tradition like arranged marriage meet the Web in such a way to create a national phenomenon…

I’ll be the first to admit that my ignorance on the subject of Indian marriage got the best of me when I first began my research. At first, I figured that these matrimonial sites were dating services like we see here in the United States, such as Match.com. I assumed the “matrimonial” part was merely a translation issue or just their way of describing dating. I was only partly correct…

Culturally, it is perfectly acceptable in India to announce to the world that your son or daughter is ready for marriage. In fact, fathers, mothers and siblings who are trying to find a match for their family member created many of the profiles on these sites.

After searching through many of the testimonials on the sites, it became clear to me that most of the married couples became engaged after a very brief courtship period. Many were married within months of first meeting each other.

As it turns out, these matrimonial sites fit in nicely with Indian culture. Sites like BharatMatrimony.com prominently display astrological information on members’ profiles. These horoscopes are taken into account when finding a life partner to determine compatibility.

I came across a telling passage online that helped me better understand how marriage is viewed in India: “A marriage in India is considered a marriage of families rather than the marriage of individuals.”

I mentioned last week that Yahoo! and Canaan Partners invested $8.65 million in BharatMatrimony.com, one of India’s largest matrimonial websites. Execs at BharatMatrimony told ZeeNews.com that they expect to register 2.5 million users in 2006-07, as compared to 1.5 million that were registered in 2005-06.

And these marriage websites are no passing fad. Statistics show that the reason 15% of Indians are online is for matrimonial searches. And if you think people aren’t really using services like this, think again.

Since BharatMatrimony.com went online in 1997, it claims to have facilitated more than 700,000 marriages all over the world. As of now, the site has a staggering nine million members.

Another matrimonial site, Shaadi.com, claims it receives more than 50 testimonials a day from happy couples. This site now posts more than 3.6 million photos of singles, and more than 710,000 success stories have been reported to the company.

I’ll continue my series on India next week.

Best,
Gunner
January 15, 2007

P.S.: Don’t stay on the sidelines and miss out on the huge profit potential of options any longer…not when you have the chance to get on board with this expert guide and his astonishing “double your money” potential in average gains on every pick since 1999. Gains from 1999 to 2006 totaled more than $1.33 million.

Investing in India was originally featured in the Penny Sleuth.

Unfortunately, most won’t until it is too late. But I don’t want you won’t fall into that trap. Let me explain…

For the first time since the British pulled out of India in 1947, the world’s largest democratic nation opened its virgin $300 billion retail sector up to a foreign mega-retailer. Namely: Wal-Mart.

Yesterday, Wal-Mart announced it formed an alliance with Bharti Enterprises Ltd. (a leading Indian telecommunications company) to open hundreds of stores in India over the next several years. According to an article on investor.com, “Under the deal, Wal-Mart and Bharti Enterprises will set up a joint venture to manage procurement, inventories and logistics, while stores will be set up under a franchise agreement, said Sunil Bharti Mittal, the chief executive of the Indian company.”

This is a massive story – although it didn’t make the headline of any mainstream news source that I saw. (It was buried under about 10 stories that came out that day). This sole event will lead to billions and billions in profits for investors (especially small-cap).

You see, until yesterday, 97% of India’s retail sector was made up of Indian mom and pop storeowners like the ones in this picture:

For the last 49 years, the Wal-Marts, Targets and Sam’s Clubs of the world were not granted access to India’s blossoming consumer class. The country’s leftist leaders wanted to protect the millions of small-time shopkeepers that dominate the retail sector. After all, the politicians need votes come election time. And this has been the major item on the Communist ticket for years now.

Screw the Communists!

To be a true super power you cannot close yourself off competition – whether foreign or domestic. By doing so you sacrifice your own people’s long-term prosperity for short-term mediocrity. By allowing major retail outfits like Wal-Mart into India you encourage billions of dollars to be spent on access roads, parking lots, water purification, infrastructure development, banking development, insurance writing and real-estate development. And on top of that, you encourage billions in foreign direct investment — money India can use to improve its living standard.

As a guy who has been to India twice in the last three years (and seen the problems with my own eyes), believe me: India has a lot of room for improvement. If you doubt that, here is a picture of an Indian slum my buddies Karim, Greg and I took this past February:

Of course, there will be some negatives that follow Wal-Mart and other massive retail outfits into India. Thousands of mom and pop shop owners will go out of business – just like they have here in the United State when Wal-Mart set up shop. Politicians (who are on the hook come election time) will scream bloody murder – just like they do here in the United States. And thousands of folks without a job will tell Wal-Mart and its supporters that they are the devil incarnate – just like they do here in the United States.

BOO-HOO. Get over it. All great economic nations are founded on a principle of competition – both domestic and from abroad. That’s how progress is made. That’s how improvements are encouraged. And that’s how ingenuity is promoted.

It’s also how investors make a lot of money.

The last time a major Asian country opened its retail sector to foreign direct investment was China. In 1992, it opened its then $75 billion cash cow to foreign investment for the first time ever. And what followed in China was a wildly lucrative series of events…

• The Hang Seng Stock Exchange rose as much as 314%
• The Shanghai Stock Exchange’s market value soared 44 times over
• And the Chinese retail market grew from $75 billion to $480 billion. That’s a 15.3% annual growth rate for 13 years.

Looking forward, there are going to be a lot of investment ideas that pop up in India. Many of them will be small-cap in nature. But it is going to take time to find the really good ones.

Right now, I am working with Kif Hancock – editor of The Bull Hunter — to find an Indian play that will directly benefit from India’s emerging retail sector. Kif is still in the due diligence stages right now. But as soon as he has something figured out, I’ll let you know.

For now, please know this…

India’s retail market is not headline news at this time. No one is talking about it. No one is thinking about how to make money when it opens up. But it will open up (it is just starting to now). And investors who follow this story early on could make a mint . As investor.com reported yesterday…

“India’s retail industry is estimated at about $300 billion, and is forecast to grow to $427 billion in 2010 and $637 billion in 2015, according to consultancy Technopak Advisors.”

If you are interested in getting some of the billions in profits, stay tuned to this space. We here at the Sleuth will fill you in – early on in the game.

Best regards,
James Boric
November 28, 2006

P.S.: The last time we reported on India our  winning plays quickly shot through projected profit targets and yielded a combined average gain of 70%.

P.P.S.: Let me know what you think about India opening up its retail sector. Do you care? Do you have an opinion about anything I said in this Sleuth? Give us your two-cents. If you have something good to say, I’ll publish it in an upcoming article.

Investing in India was originally featured in the Penny Sleuth.

But could we see 14K by year’s end? It could happen. Considering the strong corporate earnings, the strong overseas fund inflow, the positive news that India will spend $350 billion on infrastructure, and a confident Finance Minister Palaniappan Chidambaram who believes India could expand by 10% in “the near future and poverty afflicting millions be eradicated in the next 10-20 years,” according to FinancialExpress.com.

However, does the latest Sensex run through four psychological barriers that overvalue Indian stocks? Nope. The economy is running strong. Corporate earnings are good. And, considering the historical bull runs witnessed by the likes of American and Japanese markets, there’s no reason why the Sensex run couldn’t be sustained. Welcome to the Indian bull market…

According to TheInquirer.net, India is expected to see a 160% jump in Internet users, which should drive more traffic and revenue to Internet sites. And second, I believe Rediff and Sify are buyout candidates for Yahoo! or Google based on recent discussions.

Yahoo!, for one, just inked an $8.6 million deal with Bharat Matrimoney, an Internet personals site (the Indian online matrimonial market is worth an estimated $200 million), and is reportedly “hungry for more acquisitions and tie-ups,” according to BusinessWeek.com. Yahoo! is so hot for India that it’s already announced “plans to launch up to six new portals in regional languages, and acquire or enter into a partnership with an Indian company,” according to Business-Standard.com. In fact, a decision on a partnership and/or acquisition is expected over the next 6-10 months.

And, my Google assumption is based on an invitation on its Indian website for applications from people who can “identify and evaluate acquisition opportunities across existing and future market opportunities, drive management team decisions, lead deal execution, and help manage post-acquisition integration and performance evaluation in the South Asia region.” That tells me Google’s on the hunt, too.

REDF is a buy under $18. Visit: http://www.rediff.com
SIFY is a buy under $11. Visit: http://www.sifycorp.com

Good investing,
Ian
November 7, 2006

Investing in India was originally featured in the Penny Sleuth.

For the last 10 days, Greg Grillot, Karim Kahemtulla and I trekked all over India. We visited Delhi, Agra, Bangalore and Mumbai (also known as Bombay) — in search of investment ideas, business contacts and real, on-the-ground insights into this emerging superpower.

It didn’t take us long to realize India is a country of contradictions. There are pockets of tremendous wealth surrounded by tear-jerking poverty. There are expensive European cars traveling on gravel roads lined with trash, excrement and rotting carcasses. And there are factory workers who can’t spell their names but are buying stocks on the surging Sensex.

I could write for days about everything I saw in India — and try to explain the contradictions to you. But I won’t. Instead, I will show you firsthand — via the pictures we took over the last two weeks. You’ll see everything from the Taj Mahal to the poor tent communities… glorious hotels surrounded by 4-by-4 concrete “homes”… and modern malls built next to mom-and-pop food stands.

The only difference is you don’t have to take a 16-hour flight and spend $10,000 to see all of this.

Here is some of what I saw in India…

indi

In Delhi, most people who can afford to drive drive what are called tuk-tuks (the green and yellow vehicles you see in this picture). These funny-looking three-wheelers run on natural gas and are small enough to zip in and out of traffic — which in India is a must. Stoplights, double yellow lines and lane markers mean NOTHING in India. It’s every man for himself. Trust me, you haven’t lived until you’ve survived 10 days driving and walking in Delhi traffic. We narrowly avoided death on several occasions… crikey.

You don’t have to go far in Delhi (or anywhere in India) to see a scene like this: modern high-rises surrounded by cows, dogs, chickens and monkeys. Indians believe you can tell a lot about a country based on how the people treat their animals. In India, the animals are treated very well. They can go just about anywhere…

On day two of our trip, we got up at 4:30 in the morning to catch a train to Agra — home of the Taj Mahal. This is a picture of my buddy Greg Grillot waiting by our train. As you can see, we managed to get tickets for the “air conditioned” car. We were pumped — until we saw what the AC unit looked like. Check it out in the picture below…

Nothing like eight of nine high-powered fans to keep you cool! YEAH!

By the time we got to Agra, we couldn’t wait to see the Taj Mahal — one of the wonders of the world. This breathtaking white marble structure was built over a span of 22 years by Muslim Emperor Shah Jahan to honor his late wife, Mumtaz Mahal.

More than 20,000 workers delicately carved every piece of marble by hand. And when they were finished, it looked like this…

To give you some sort of an idea of just how large the Taj Mahal is, the central dome is 213 feet tall and 58 feet in diameter, and the four minarets are each 162.5 feet tall. I couldn’t imagine anyone building something like this today — let alone in 1648. Remember, there were no power tools back then. Everything was done by hand.

Fast-forward to today…

Not much has changed in Agra. Workers still make intricate marble tables, plates, cups and ornaments by hand. Below you can see a few Indian workers carving a marble tabletop — adorning it with precious stones to attract tourists like me to spend money.

When it is finished, this marble tabletop will go for several thousand dollars — far more than most Indians make in an entire year. Talk about a contradiction! While India’s GDP is forecasted to grow 8.1% this year, the average salary in India will only be about $500.

This disparity of wealth is exactly why most people in Agra live on streets that look like this…

Despite the fact that thousands of tourists come to Agra every year to see the Taj Mahal, the rest of the town is depressing and backward. And I doubt it will ever change. The Indian government banned industrial business of any sort from setting up shop in Agra to protect the Taj from pollution. The result: no jobs, a lot of poverty and scenes like this…

Of course, just when we started to feel depressed about Agra, it was time for lunch. So we got in our car and drove a few miles to the Oberoi Hotel — once rated the finest hotel in the world.

Amazing view. From our balcony view at the Oberoi we could see the Taj Mahal in the background. And below, a monkey waved to us as we sipped on our Kingfisher beers.

From Agra, we went back to Delhi… and then on to Bangalore.

The plan was to spend about a day and a half in Bangalore. But Air Sahara (one of India’s TERRIBLE domestic air carriers) put a wrench in our plans. Thanks to a three-hour delay, we didn’t get into Bangalore until late in the evening. And the only thing we had time to do the next day was take a car tour of the city. Here are a few of the sites we stopped to see…

Bangalore was far and away the most modern city I saw in India. The high-rises, hotels and shops are reminiscent of Europe and North America. But you still didn’t have to go far to see old monuments like this one. The bull you see here is dedicated to Nandi, the Indian god that represents passion and love.

Farther away from downtown, there was one of the most gorgeous botanical gardens I have ever seen.

It cost 5 rupees to get into this botanical park, so there weren’t any beggars or homeless people bothering us while we walked the grounds. But nothing could keep the dogs away — they loved this quiet place. It made for a great napping area…

From Bangalore, we flew to Mumbai. Once again we used Air Sahara — arguably the worst air carrier of all time. This time we were delayed by four hours for no apparent reason. We concluded that there were not enough people to fill the plane… so management decided to combine two flights into one. UGH.

As we waited for our flight, Greg and I managed to “rig” the one electrical outlet in the airport so we could both type away…

Finally, our flight took off and we arrived in Mumbai — India’s financial capital. After about an hour-long drive, we made it to our home for the next 72 hours… the Taj Mahal Hotel.

This beautiful building is the Taj. It is right on the Arabian Sea — only meters away from the famous Gateway of India…

The Gateway of India was built to commemorate the visit of King George V and Queen Mary in 1911 — during the British rule of India. It was also the site where the last British sailor set sail when India got its independence in 1947.

All around the Gateway there were peddlers, snake charmers and beggars. One man tried to sell me a massive balloon… another a marble box… and another a set of Mumbai postcards.

I bought the postcards for 50 rupees — or about $1.

As India’s economic hub, there were quite a few gorgeous buildings in Mumbai. But like anywhere in India, we didn’t have to go far to see the slums. This was depressing…

Could you imagine what it would be like to live here? I can’t. It’s easy to block this kind of scene from your mind when you invest in an emerging country like India. But make no mistake about it, India has a long way to go before it is fully developed.

OK, let’s leave the poverty for a second and travel to Elephanta Island — 11 kilometers off the coast of Mumbai.

Elephanta Island is home to a series of caves that the Indians carved out between the fifth and eighth centuries. In these caves are intricate depictions of Shiva, the Hindu god of destruction. Check it out…

And all over Elephanta Island the monkeys ran wild. This one stole a lady’s cookies and had a feast in the trees…

These little fellars look friendly. But beware…

I made the mistake of getting too close to one. It hissed and barked at me. Instead of heeding its warning and backing off, I stood my ground. A second later it lunged at me — teeth and all. That was all I needed to see…

I bolted from that tree faster than an Olympic sprinter on steroids!

After we took in the sights of Elephanta Island, we got on a ferryboat and returned to mainland Mumbai. Here’s the view of the city from the Arabian Sea…

That fog you see in this picture really isn’t fog. It’s solid pollution. To help the environment, much of India now requires all buses and tuk-tuks to run on natural gas. We’ll see if it helps…

All in all, my trip to India was a great one. Despite the poverty, I saw modern malls, vibrant markets and a healthy middle class.

There is no doubt India will continue to grow. But as an investor, you need to know what you are getting into before you lay down your hard-earned money.

Right now, the Indian market is very much overvalued. The average stock on the Sensex trades for over 18 times earnings and 4 times book value. That’s at the top of its historic trading range. And I wouldn’t be surprised if a major correction happens soon. Still, there is one area of the Indian market that I would consider investing in right now: construction.

Everywhere I visited I saw people building streets, sidewalks and shopping centers. Cement demand was up 14% this past January (versus January 2005). And the construction sector of the market was one of the few laggards last year.

As the government starts to invest more and more money in infrastructure (which it MUST), the construction sector will pick up.

To help you figure out how to take advantage of this up-and-coming trend, I’ve asked Sala Kannan to find the best vehicle for you to buy. She’s working on it now. And as soon as she has it figured out, I’ll let you know.

Until then, I hope you enjoyed your walk through India.

Best regards,

James Boric
February 16, 2006

P.S. Sala wrote a fantastic India report about three months ago. In it she picked four stocks to take advantage of the surging Indian market. Today, all four stocks are up — some as much as 60%. Now she is working on the next big idea…Africa.

India Reminiscences: India… a Country of Contradictions was originally featured in the Penny Sleuth.