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Author: SteppenWulf Two stars, 250 posts Old School Fool CAPS All Star Global Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 244  
Subject: investing in India Date: 4/9/2007 8:54 PM
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I am very interested in long term investing in some Indian stocks.

I know a reasonable bit about the Indian consulting companies, since I have had business relationships with quite a few for many years, sometimes in the role of a purchaser of services, sometimes as a co-consultant (up or down the food chain) and sometimes as a competitor.

Of course consulting companies are not the only businesses in India - I have actually been watching the following companies - I know they are priced a bit high right now:
Inf - Infosys
Wit - Wipro
Say - Satyam
CTSH - Cognizant
IBN - ICICI Bank
HDB - HDFC Bank
TTM - Tata Motors

I have a good friend who is a bit of an expert in macro economic analysis of economies (he is the managing editor of a very expensive magazine). He is extremely bullish on India over the medium/long term - he has a list of reasons that makes him think that Indian growth has far fewer risks over the medium/long term than China. He has told me to expect a roller coaster short term however, because the Indian government has allowed inflation to grow, and will have to take some strong medicine (interest rate hikes) in the next year to control it, that could depress stock prices before they are able to shoot up again.

Since I don't want to be out of the market altogether, I have been using an option strategy - credit back spreads, to participate in the upside, while protecting myself on the downside (for instance, selling one unit of a lower call, and buying two units of a higher call, with an over all credit on the transaction, so that I can make money if the stock goes up or down).

I have two questions:

1. Would anyone like to suggest other Indian companies, particularly less well known companies that might be interesting investment possibilities.

2. I have heard many on these boards talk about China being far overvalued, and then also dismiss India as being overvalued in the same breath. I think TMFAgewone said they were "scary" :) I do think we are talking about almost opposite types of companies in China and India.

If you compare the PEG ratio of INFY and SAY (around 1) to the PEG of their closest competitors, ACN, EDS, and IBM (1.3-1.7) the Indian companies don't look so expensive. Why do we think the Indian firms are overvalued, when considering their growth rates?

Thanks in advance for your answers
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