Look for the fundamental issues

James J.C. Birch

BusinessWorld Nov 22, 2004

I don't think you want to go crazy and do what the Japanese have done - build roads for the sake of building roads. Even the Chinese have probably built too many highways and too many airports. And they've built them because constructing things creates employment opportunities. I'm not suggesting you do that. The most important thing is that the economy grows and companies do well. You shouldn't worry... the money in the end will find equilibrium.There's a great paranoia in the Indian markets about whether the FIIs (foreign institutional investors) are buying or selling? You should take a longer view. In the end, money will come in if things are good and it will go out if it's bad. FII inflows or outflows are caused by fundamental issues.

So look for the fundamental issues rather than trying to catch the FII moves. In times of high tension, people take money out of risky markets and India, to date, is being treated as a risky market. So there are two angles. Is India fundamentally a good place to invest in the long term? The answer is yes. Is today, 5 November, a good time to buy? It's a tricky and a less important question. I think China has a smaller number of shareholders than India. A lot of people have the money to buy shares, but they don't have a long history or understanding of the market. Your savings rate is quite high but all of it goes into bank deposits and gold. There is a big opportunity for locals in both countries to invest in stocks. It can only grow from here.