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  Perception vs. Reality Investing in IndiaDate: 19/05/2010
Ti Corridors

The fact that pension funds and their returns from investing in UK will remain mediocre has not really dawned on people. Now where does India stand in this global allocation or for retail investors in UK trying to save up for their pension or grow their capital? Lets us start with facts India as a market open for foreign investors has a history of about 16-17 years when the then current Prime Minister initiated the reform process in the capacity of the Finance Minister. If you look at returns say since 94 the market has returned approximately 13% till end Dec 09, 22.6% over the last 10 years and 29% over last 5 years. These are good numbers and certainly make for a long term investment case. During these years, the country, the economy, the market and the very nature of life in India has undergone a drastic change towards consumerism and materialism but let us first understand why the last 5 years have been so good.

Clearly, the first few years of the economy opening up were very uncertain in terms of the reform process, government policy as well as the health of the macro indicators. It was like a gold rush for the starved corporate sector with no licenses required for producing basic things like steel, cement and saw huge capacity creation. This then led to a huge over supply across industries and with lack of regulatory clarity for infrastructure development saw the market stay in a narrow range for several years. The so called Information Technology revolution had not blossomed as yet.

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