Warren Buffett speaks at Berkshire Hathaway’s annual shareholder meeting in Omaha, Nebraska on May 4, 2024.
CNBC
This report is from this week’s CNBC ‘Inside India’ newsletter, delivering timely and insightful news and market commentary on emerging powers and the big companies behind their phenomenal rise. Masu. Like what you see?You can subscribe here.
Warren Buffett once bet that investing in the S&P 500 tracker would outperform most hedge funds.
But this bet by the Oracle of Omaha, which held Berkshire Hathaway’s annual general meeting over the weekend, would have also outperformed many other indexes, including the BSE India Sensex and Nifty 50.
For local investors, that means Indian stocks have underperformed the U.S. benchmark by more than 45 percent since Buffett’s 2008 bet. For foreign investors, the return in US dollar terms would have been even worse if there was a difference of 280 percentage points between the two indexes.
It’s also a story happening today. The S&P 500 is up 9% this year, but India’s benchmark has struggled to stay in the black. India’s nearly 8% GDP growth rate does not seem to be reflected in stock market returns.
So what’s missing?
Jonathan Pines, contrarian investor and portfolio manager at Federated Hermes, said: “If you were a top-down investor, India would look great because everything is going well in India.” , believes Indian stocks have “absolutely crazy valuations”.
Pines believes that the rapid expansion of India’s economy is coupled with the creation of new businesses and opportunities. But it also means intense competition for incumbent companies listed on the stock market.
He further added, “Even if India’s per capita GDP grows rapidly, it does not mean that the overall stock market will grow its profits at the same rate as there will be competition.”
Rajeev Agrawal, a hedge fund manager and founder of Doordarshi Advisors, says that aside from comparisons with the United States, which has a per capita GDP of more than $76,000, comparing India to what it was 10 to 20 years ago is also They say it’s unfair.
India’s GDP per capita was $624 20 years ago and has increased 300% since then. Agrawal believes the $2,500 mark means Indian consumers will be able to spend for the first time on discretionary items, a hallmark of global stock market growth.
This year has also been a particularly unfortunate year for Indian stock market investors due to political uncertainty.
Analysts pointed to speculation that Prime Minister Narendra Modi’s Bharatiya Janata Party could win fewer seats than expected due to lower voter turnout in the first two phases of the ongoing general election. ing.
India’s VIX index, widely known as a measure of fear, rose for the 11th straight day, the longest since March 2020. The index hit an all-time low before the election, but has since closed to its highest level in more than a year.
Finally, some Indian stocks also appear to be coming out of the bubble, said Kevin Carter, chief investment officer at the firm that runs the India Internet & E-Commerce ETF.
For example, One97 Communications, owner of fintech giant Paytm and once backed by Buffett, has fallen nearly 80% since its IPO in 2021. Apart from the normalization of valuations, one of its former affiliates is also dealing with a regulatory crisis.
But market watchers say rising volatility and lackluster index performance mean investors could make money if they watch carefully.
“This whole story is very early in India and there was certainly a bubble fueled by the pandemic. But that doesn’t mean opportunities don’t still exist for genuine investors.” added Carter. “If you thought India’s chances looked good till now, you can do that.” 1715321119 You get twice the amount for the same price. ”
Agrawal said people should ignore the turmoil in Indian banks like HDFC and instead look to microfinance lenders like Ujjivan Financial Services as the central bank tightens its grip.
The former has declined by 12% over the past year, while the latter has more than doubled.
Mr. Modi was on the ballot at the halfway point of the election. India’s elections passed the halfway stage this week, with vote counting scheduled to begin on June 4. Prime Minister Narendra Modi cast his vote in the Gandhinagar Lok Sabha constituency in the western part of the country on Tuesday. Prime Minister Modi’s close aide Amit Shah is the Bharatiya Janata Party’s candidate.
Four people were arrested on suspicion of tricking men into fighting for Russia. Four people have been detained by Indian police on suspicion of luring young people to fight for Russia against Ukraine. They were reportedly promised well-paying jobs and university admissions. According to India’s Central Bureau of Investigation, about 35 people have been lured into such situations so far.
Mumbai Indians withdraws from the Indian Premier League. On Wednesday, the cricket club became the first team to be eliminated from the 2024 tournament. At the time of the keystroke, Royal Challengers Bangalore were playing against Punjab Kings and were in the lead. Virat Kohli and Rajat Patidar are on a wicket of 95 for 2.
India’s stock market indexes, the Sensex and Nifty 50, have had a disastrous week, with both down around 2%. The benchmark has gained less than 1% since January, giving up most of this year’s gains.
India’s 10-year government bond yield edged down to 7.13% last week. The Indian rupee weakened, narrowing its losses against the US dollar.
This week on CNBC TV, Tata Power CEO Pravya Sinha spoke about what the company is doing to increase its renewable energy capacity. She predicted that the country’s electricity demand would “increase significantly” over the next decade.
We also spoke at length about Qualcomm, including discussing opportunities in the Indian market with Savi Soin, president of Qualcomm’s India division.
And, keeping with the technology theme, Microsoft Asia President Ahmed Mazari spoke about the company’s investments in Asia. He said India had a “huge number of graduates” but questioned how many of them had “the skills and proficiency of today”.
The election will continue next week, with voting taking place in stages until June 1st, with vote counting beginning a few days later.
Aadhar Housing Finance is scheduled to go public next week and its shares will be available on the secondary market on NSE and BSE on Wednesday.
Travel distribution platform TBO Tek is also expected to go public on Wednesday after the subscription period ends on Friday.
