Why India’s Falling Stock Market Could Mean Big Profits For UK Investors

Date 16/07/2008

Profit Hunter

Manraaj Singh

India’s economy is white hot. It’s grown by more than 9% every year since 2005.

So all investors who are serious about growing their wealth in the long-term need to have exposure to this economy.

But right now its stock markets are getting hammered by the global sell-off. They’re down by over 38% since the beginning of this year. That could mean big profits for UK investors. Because some of the fastest-growing Indian companies that need to raise cash could soon be heading for a listing on the AIM market.

In fact, I’m now looking at two shares that could give us chance to tap into India’s amazing growth story while keeping our money right here in London.

AIM is already a hotspot for Indian companies

We’ve seen 24 Indian companies list on the AIM over the last two and a half years. That gives you the chance to invest in everything from Indian infrastructure projects to clean energy providers to Bollywood film studios.

Investors have done well from these companies as a whole.

By the end of last week, these companies had delivered an average gain of 15% since listing. And they were up by a collective 1% over the last 12 months, versus a fall of 21% for the AIM as a whole.

And their combined market value crossed the $6 billion threshold in June this year. In fact, the biggest AIM IPO this year was by an Indian company, KSK Emerging Market India Fund. It raised £100 million. That’s hugely impressive given the current state of the markets.

Of course, we aim for more than a 15% return on our investments at Profit Hunter. But the story gets much more interesting once you dig down to the individual companies.

The returns investors have seen on AIM-listed Indian companies have actually been a lot more mixed. The top performer, Great Eastern, is up by 64% since the beginning of the year. The biggest faller, property company Naya Bharat, is down by 65%.

The best-performing Indian AIM shares have been the energy companies. The biggest duds have been the property companies.

Why Indian energy companies are a good investment

It’s easy to see why the energy companies are doing so well. More than 40 per cent of India’s population still doesn’t have direct access to power. So, India's government plans to add 78,577 MW of power generation capacity by 2012.

So the opportunities here are huge.

That’s great news for us as investors. Because we’re likely to see more of these dynamic smaller energy companies listing on the AIM. The AIM has as an impressive record of raising funds for international growth companies.

India’s own stock markets are being hit hard by the global sell-off right now. And that may continue for a while. Global credit rating agency, Fitch, has just downgraded the outlook for India’s domestic credit rating. And that may scare investors off from the domestic market in the short term.

That is going to make the AIM look like an increasingly attractive option for Indian growth companies looking to raise funds.

But there are already a number of very attractive options on the AIM. And I’ve zoomed-in on two of them right now.

I will be telling my readers more about this opportunity shortly. If you’d like to receive my latest research on this and other global investment opportunities, just click here.

Regards,

Manraaj Singh
Editor
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