Since 2001, in the course of doing research on China investments, Interfund Capital’s portfolio managers and analysts started to take notice of the extraordinary opportunities in India funds.  Apparently, Lehman Brothers agrees that India is worthy of some attention.  In a 172 page report on India investment opportunities released in October of 2007 entitled “India: Everything to Play for,” Lehman Brothers announced that “With the right reforms, India could grow at 10% for a decade.”  This is an amazing prospect considering that the total return for the Indian stock market was 18% annually from 1979 through 2005. Since 2005, the Bombay Stock Exchange(BSE) Sensitive Index Sensex  has almost tripled, making India one of the best performing stock markets in the last year, three years, five years, and ten years. (See Chart Below) 

The question one wonders is 'Can these extraordinary returns be replicated in the coming years by Indian fund managers?' For a current sectorial analysis of India funds, Indian stocks, and India ETFs please visit our stocks and funds pages.

The Lehman Brothers report believes that this growth can be sustainable withthe proper economic and political reforms. “Impressive though its economic transition has been, we judge that India could grow sustainably even faster than at present, and faster than most other studies have suggested, i.e. at 10% or so per annum over the coming decade. This judgement is contingent on India continuing to actively pursue structural economic reforms.”

India is one of the great economic growth stories of the 21st century. The nation has undergone an astonishing transformation over the past 17 years, as the government has shifted away from socialism and opened and reformed its economy. Today, India (along with China) is one of the fastest-growing countries in the developing world.

India's powerful economic growth, coming from expansion in both services and manufacturing, is a strong indicator of its burgeoning economic clout. According to the government, gross domestic product in India expanded by 9.6% in 2007 and 9.4% in 2006, helping to make the economy the world's 12th largest.
Fueling the expansion has been rapid growth in services, including call centers, software design and back-office out-sourcing. The ability of Indian companies to design and produce well-made goods at a fraction of U.S. costs has also helped India become a major exporter.

The booming economy, hefty corporate profits and an unprecedented flow of foreign investment have propelled a spectacular surge in Indian share prices. Over the past five years through February 20, the Bombay Stock Exchange's 30-stock Sensitive Index, or Sensex, returned an annualized 43% (in dollar terms). Real estate, banking and information-technology stocks have been at the forefront of the boom.

The outlook for the Indian economy remains bright, but the picture for Indian stocks is murkier. Volatility has increased amid concerns about the global credit crunch and the rupee's strength against the dollar, which hurts Indian exporters. Year-to-date through February 20 the Sensex has lost 13%. Many investors are concerned as to whether Indian Funds, India ETFs, and Indian Stocks can sustain the unprecedented growth of the last decade.

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