With so much talk about China recently, it is easy to overlook one of the world's other great emerging markets: India. A fast growing economy has induced foreign investors worldwide to place their bets on India. Few countries match the consistent gross domestic product (GDP) growth over the past decade, averaging 6 percent. The global economy is getting in on both real estate and equity markets.
Over the past two years, the Sensex - India's broad market indicator - has doubled in value, compared to the Dow Jones, which has remained flat over the same period. Similar to the U.S. indicator, the Sensex is composed of the 30 largest companies. This indicates that, unlike the bubble America experienced, India represents investment in the country's largest and most stable companies.
Foreign mutual funds, private equity groups, hedge funds and individual investors have looked to India for more substantial returns. Over a billion dollars is invested each year as India's growth continues and successful companies continue to spring up. Private equity groups worldwide are investing in young Indian companies, allowing them to grow into successful corporations. In addition, foreign financial institutions allow consumers to afford cars, homes and other luxuries- boosting domestic sectors. Employees in the booming outsourcing sector, armed with extra spending money, are also helping local businesses.
Despite all the benefits, India is wary to allow foreign corporations too much sway in its economy. Many Indians want to make sure foreign corporations do not overrun their own communities.
Underneath the high gloss of big number gains, there is always concern that the high rise in value - 30 percent in the last six months - could lead to a crash at any moment.
Real estate is another sector of the Indian market that has risen in value substantially over the last few years, particularly the commercial real estate. As India's economy has developed, there has been a greater demand for shopping centers, movie theaters and hotels.
Multinational corporations are opening up manufacturing plants, offices and laboratories within India's borders. Microsoft as well as other computer software and hardware companies, has opened up customer service offices throughout the country. General Electric has offices in India that handle accounting and information technology. Hewlett-Packard is able to pay Indian programmers a fraction of what they would pay American programmers.
New offices have pushed up the price of land in Bombay 25 percent over the past six months. As with the equity markets, many speculators feel the market may be peaking, though others see few signs of slowing down.
Those looking to invest in India find it nearly as easy as investing in the United States. Indian companies on the American exchanges tend to be those with higher market capitalizations and a history of stability.
Such companies include ICICI Bank ($8.3 billion market capitalization), Wipro ($14.2 billion) and Satyam Computers ($4.6 billion).
Though there may be quite a bit of risk involved, India's economic potential will likely continue to bring in billions of dollars from investors who are looking for the extraordinary returns that only emerging markets like India can provide.
