I am a dedicated fan of Asia. I believe that this decade belongs to Asia and more than a fair share of your investments should be facing Asia, if not directly in Asia.
The Indian government has just made it significantly easier for you to directly participate in the boom that is being experienced in India.
During the weekend, the government announced a policy to allow foreign investors to invest directly in India. I had been following this move since September, when I had discussions with several investor groups and banks about this possibility. This has finally come true.
Before this announcement, investing in India was a tricky affair. Some of the major stocks were listed on global exchanges like United States, United Kingdom, Singapore and Dubai.
Some stocks were available as ADRs (American Depository Receipts) while some could be invested via derivative instruments where the underlying was Indian stocks. Finally, the masses in the U.S. would invest in Indian stocks using mutual funds, which owned dozens of Indian stocks.
The problem with mutual fund investment is that you have to buy the bad stocks along with the good ones. In a nutshell, it was hard to cherry pick your investments.
All of that will be in the past on Jan. 15, when the Indian government formally announces the process whereby a Qualified Foreign Investor (QFI) can invest directly into Indian stocks without having to invest through an institutional investor.
While the details are emerging and the initial couple of months may be rocky while the regulations and processes are ironed out, this is a very long overdue and welcome sign from India to the global investor.
This opening of the market will bring much more liquidity to the stock markets in India and make them significantly less dependent on the vagrancies of Foreign Institutional Investors (FII). The current slump in the Indian stock markets has been directly attributed to the rapid withdrawal of capital by the FII along with the sharp decline in the Indian rupee.
This move has the potential to reverse the trend both in the stock market declines as well as Indian rupee as dollars rush in via the investors reducing the selling pressure on the rupee. The added inflow into the stocks will also aid in buying of the good stocks and lend a bottom to the markets.
A true investor is one who is out buying when there is blood in the streets.
And there certainly is blood on the Indian streets. Dalal Street was down by 25 percent in 2011, the worst performing market in the world. The rupee has declined by 17 percent while the stock market bloodletting was ongoing. So it will take a strong willed investor with solid faith in Asia to venture into this market, but fortune favors the brave.
This is a golden opportunity for the global investor to begin their foray into Dalal Street and place themselves in an enviable position to capitalize on the Indian Stock markets which are poised to recover in the latter part of 2012.
Add to this gain the appreciation that will be seen in the Rupee and you could be sitting on some very handsome double digits gains by this time next year.
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