India: The Place to Be Right Now

Editor's Note: This column by Jay Somaney is a special bonus for RealMoney readers. It appeared on Street Insight April 21. To sign up for Street Insight, where you can read Jay's commentary regularly, please click here.

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There's a lot of buzz about India, and everyone seems to be latching onto its story lately. Even CNBC sent one of its anchors there to see things firsthand. While India's story started a long time ago, expect that buzz to reach a fever pitch over the next couple of years.

India has long been associated with the day of the raj, and to most investors, it's akin to China 20 years ago -- a country where investments are fraught with risk. Market pundits like Jim Rogers take the sensationalist view, citing massive bureaucracy and rampant infrastructure and corruption issues as all reasons to avoid investing in India. I think they are flat-out wrong. While problems do exist, India is a great place to be if you're a longer-term investor.

Why? Well, the opportunity lies in the sheer number of people there. With about 1.2 billion people, India is second to China in terms of population, as China has about 200 million more residents. However, English speakers make up about 80% of India's educated population, vs. barely 30% of China's.

A Technology Revolution

If you're looking for the next Microsoft (MSFT - commentary - Cramer's Take) or Cisco (CSCO - commentary - Cramer's Take), you might find it in India. For example, last summer I spent four weeks in India, and I was amazed at how the place had changed. I visit there almost every 15 months, but my last trip was eye-opening. Cell phones have nearly replaced wireline access, and online access numbers are exploding. The cell-phone market is growing almost 100% year over year. There were about 30 million wireless subscribers last year, and estimates are for wireless subs to reach as high as 60 million this year.

The Indian economy is expected to grow by about 8% this fiscal year. The conservative forward five-year growth rate is a bit above 6% per year. Growth rate for China is also along those lines, but its growth is mainly coming from an industrial and manufacturing base. Indian growth is based predominantly on technology and services.

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Jay Somaney is a partner and fund manager with TSG Capital Partners, a hedge fund based in Plano, Texas. Previously, Somaney worked at TSG Tech Fund, a hedge fund focused on the shares of companies involved in the Internet and related technology. Prior to that, Somaney worked on the sell side as a tech and telecom analyst. Before that, he was a fund manager and partner with SMS International, a hedge fund specializing in tech investments in the Far East (non-Japan). At time of publication, he had no positions in any of the stocks mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Somaney appreciates your feedback and invites you to send it to [e-mail].