This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

How to Play the India Growth Story

India's GDP grew 6% during the quarter ended December 2009 and early estimates by India's Chief Economic Advisor peg the March 2010 quarter growth at 8.6%.

The IMF estimates India's GDP to grow 8.75% this year and 8.5% in 2011. India's Central Bank estimates growth at 8% for the year ending March 2011. Various other estimates peg India's GDP growth in the region of 8% to 9%.

Strong domestic demand and continued capital inflows can help India even surpass these growth estimates. Risks to growth, if any, are expected to be only on account of supply side constraints or slower-than-expected implementation of reforms.

India's equity markets are trading at an average forward price-to-earnings ratio of 16. While this may appear expensive, it is noteworthy that consensus estimates peg EPS growth for tickers constituting the country's benchmark indices -- BSE and Nifty -- at around 20%-24% for each of the next two years.

We prefer the financials, infrastructure and automobile sectors over IT firms, as the former are leveraged largely to domestic demand growth. The Financials sector is expected to outperform the broader market this year. India's economy is entering a rising interest rate cycle, which will have a positive impact on banks' profitability due to expanding asset spreads.

The Central Bank recently announced a 25-basis-points rate hike and analysts widely expect an overall 100-basis-points rate hike this year. We reckon ICICI Bank (IBN) and HDFC Bank (HDB) could emerge as the key winners.

Another star this year could be non-ferrous metals and mining company Sterlite Industries India (SLT). Apart from riding the global metals boom, the company has a strong order pipeline in India for zinc, aluminum, copper and energy assets to be commissioned over the next year.

Increased government spending, as reflected in higher budgetary allocations, indicate a strong year ahead for the infrastructure sector -- especially energy -- where orders are likely to be awarded for adding 15,000 MW of power generation capacity. The telecom sector is witnessing heightened activity with the impending 3G spectrum allocation, increased competition from new entrants and domestic majors expanding abroad to sustain growth and exploit cost synergies. Domestic consolidation looks likely and the major established players could emerge as winners.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,960.57 -123.23 -0.72%
S&P 500 1,978.34 -9.64 -0.48%
NASDAQ 4,449.5640 -22.5440 -0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs