Post Recession Investment Opportunities in India

" I do not look to jump over 7 foot bars;
I look for 1 foot bars that I can step over".
- Warren Buffet

Most experts agree that recession is over. But what lies ahead for the investors?

Answer to this question depends on whom you ask. although economic forecast for the next 12-18 months vary greatly, they can be reduced to three essential types.

Slow growth caused by tightened credit, as occurred in 1992. Although production levels are normal, it is achieved by less employees. Hence increase in unemployment causes the growth to be slow.

Sharp rebound : Mainly caused by the stimulus funds by the Government and other agencies. This happened in 1970. Now also it is evident that automobile sector has started to expand, just six months after a sharp contraction. Also $850 billion stimulus funds of the US Government alone should enter the market in 2010 . This should add the wind for economy to sail.

Double-Dip Recession : This is the most pessimistic scenario. We may fall back to another recession. Unemployment, huge Government deficit, stingy credit markets and uncertainty in global business scenarios can lead to another contraction as happened in 1982.

(India opened for capital word only after 1990s. We have just seen two downfalls. The other I mentioned here are from the other parts where the capital based economy is in effect.)

Nobody except history repeats, But it is likely that it can borrow characteristics from all three scenarios, or may have its own characteristics. So it is important to look for portfolios that could survive those three types of recovery namely rebound, lightening bolt and Double-Dip. As long as investments portfolios are diversified, it takes a good shape, no matter which ride we take. It is not necessary for us to be accurate in prediction. Clairvoyance is not important but diversification is.

With the previous records it is evident that small-company stocks are better opportunities, they usually fall in the down-time very quickly, and also regain very quickly during an up-time. In short there is high risk and also high rewards.

United Kingdom Trade and investment department (UKTI) made an interesting observation in its report saying that India is top 3rd country to invest, after China and US. it observed that "starting point of success is to take an informed strategic and long term view about where opportunity lies".

Stimulus packages unveiled by Government of India should boost exports. Relaxation on export to gulf countries in the field of food, textiles and construction materials is a welcome news to some 30 million people in that area, as well a great business opportunity for the Indian exporters.

Impact of US visa regulations affects the IT and ITeS companies, still if service oriented companies are coming with products, then it is a good opportunity for investing. The power in infrastructure field including Power sector cannot be ignored. Oil and natural gas is still a lucrative business, FMCG will be regaining its position. Business like inland fisheries, food commodities and hardware items will be on rising.

Service oriented Models in IT like SAAS(software as a service) and Cloud computing, storage solutions is a growth opportunity. Educational and health remain at their positions substantially. Hospitality business is acceptable if the holding capacity is there for long time.

Basic economy of any countries follows a hierarchy like

economy based on tourism
economy based on agriculture
economy based on raw material export
economy based on finished goods export
economy based on inland services.

This period, for India is convergence period where we are moving from economy based on raw material export to finished goods export. Any investments based on technology firms and R & D are worthy.

Statistics suggest that there are only 12 cars in India for every 1000 people. It simply means that automobile industry has a huge potential in spite of the hit by recession. renewable energy research and production is another field. Ultimately the opportunities for investment in India are abundant. But the question to be asked before making any decision is "Does this company makes an essential or non-essential product?"

No decision is right or wrong, only time will show it. But the strategy and environmental scanning makes to make the failures less fatal. As Warren Buffet rightly said " It is only when the tide goes out that you discover who's been swimming naked".