Investing in the Indian tech sector: closed-end funds that invest in India returned between 31% and 71% for the 12 months ending in April, 2000
Money Digest, June, 2000
India has one of the largest software centres in the world outside of the United States. India's software industry is growing at the rate of 50% per year. Growing numbers of Indian high tech companies are being listed on the Bombay stock exchange. Last year two of them, Infosys and Satyam Infoway, were also made available as American Depository Receipts (ADRs) on Nasdaq. More ADRs are planned for the North American market.
Yet investing in India has been a frustrating affair. India's legendary bureaucracy and its ever-changing political scene can be very frustrating for non-Indian investors.
But things have been changing. Last year's election brought in a relatively stable government. The government is creating favourable conditions for foreign investors. The economy is expected to grow a healthy 7% this year. The Bombay stock market more than doubled between mid-1999 and the first quarter of 2000. Closed-end funds that invest in India returned between 31% and 71% for the 12 months ending in April, 2000.
However, when U.S. high tech stocks pulled back, so did the Indian stock market. Since many analysts feel that India's growth will continue for the next few years, if you are considering investing in India, this might be a good time.
Although one can invest in Indian stocks through ADRs listed on Nasdaq, there are better ways to invest in India. The reason for this is that the Nasdaq, listed Indian stocks trade at a considerable premium over their prices in India. This is because the Indian government limits their availability, thereby pushing their prices up.
So the best way to participate in India's growth is through closed-end mutual funds that trade generally at a discount on the North American stock markets.
Closed-end funds that invest in India (NYSE)(*) India Fund (IFN) $12.00 India Growth Fund (IGF) 10.00 Jardine Fleming India (JFI) 9.75
(*) All prices are recent and in U.S. $
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