India has had a gloomy 2012. Since the dawn of the year, it has seen its stock markets take the route of a roller coaster. Policy paralysis and government inefficiencies have become everyday phrases. Interest rates have been blamed for a slowdown in investments. And inflation has reared its ugly head all over again. As a result, investors and experts have started to rethink their India focused investment strategy. After all sub 8% GDP growth rates do not sound attractive to anyone. But even through this seemingly unsolvable mess there is one man who continues to believe in India. And this is the same man who correctly predicted the crisis of 2008. The man is none other than the famous economist Jim Walker.
In an interview to a leading daily, he has stated that "Indian companies and the country as a whole are an excellent long term investment." Despite the hiccups described above, he feels that as long as the Reserve Bank of India (RBI) continues to do its job, the long term strength of the country remains intact. But he has added a caveat that this is possible only when the government follows the footsteps of the RBI and does its job as well. In his opinion the recent move by the RBI to leave the interest rates unchanged would add pressure on the government. It has been forced into accepting that it cannot rely exclusively on the RBI policies to drive investment growth in the country. It has to do its job through policy reforms and give the economy a general direction for growth. Unless this happens, the dismal growth rates that we saw in recent times would become worrisome and predictable.
Therefore, he has suggested that foreign investors should look at buying Indian market ETFs (Exchange Traded Funds) in US dollars. This would help mitigate the negative impact of the falling rupee. While Mr Walker's advice is more focused on the international investors, his message can be used by the domestic investors as well. The message is clear and simple. The long term case for India remains positive. Therefore prudently select the stocks based on their fundamental strengths and hold on to them for a long term horizon. In the short term there will be hiccups. But in the long term the handsome returns would make all the short term pains worthwhile.
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