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3 Ways to Play India
02/10/2015 10:00 am EST
The US and India trade relationship has been muted for several years now. But after India's prime minister, Narendra Modi, welcomed President Obama with a bear hug, a new world order could be in effect, suggests Marshall Hargrave in Daily Profit.
A strengthening of relations between the US and India will be a big positive for the world's second most populous country, most of which is impoverished. With that in mind, is there a way for investors to profit? I certainly think so.
The Indian market took off after Modi was elected prime minister in May. Modi, part of the pro-business party, won the election by a landslide, signaling that the Indian people are starved for change.
Modi ran on the promise to stimulate growth for the largely impoverished country. With that in mind, here are the top three ways to play India this year:
ICICI Bank Ltd. (IBN)
ICICI has nearly 4,000 branch locations and generates about 85% of its profits from India. This bank has one of the biggest opportunities around, which includes tapping into India's large unbanked population.
ICICI also has a strong presence in insurance, which will also a benefactor of India's growing middle class.
What's more is that ICICI is expected to grow earnings by over 19% next year, which is more than any of the major global banks. Its 30% return on equity towers above other banks and it also offers a 1.2% dividend yield.
Infosys Ltd. (INFY)
Infosys is an IT services company in India that will continue to benefit from the rise of offshore outsourcing. It already has a number of long-standing clients and plans on growing its top (revenue) and bottom (earnings) lines going forward.
On the top line, Infosys is hiring more salespeople to boost its international presence and develop new partnerships. On the bottom line, the IT company plans to cut costs and shift more of its business mix toward higher-margin services. Plus, it has no debt and pays a 1.4% dividend yield.
Tata Motors Ltd. (TTM)
Last but not least is India's largest commercial vehicle maker, Tata Motors. This company will benefit from the long-term demand of vehicles in India. In part, that'll be driven by India's commitment to infrastructure spending, which boosts commercial vehicle demand.
And on the other side, more roads will power passenger vehicle demand. There are only 20 vehicles per 1,000 people in India, leaving a big market opportunity for Tata.
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