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business&finance
Alpesh B Patel, Fund Manager and Principal, Praefinium Partners
Market coMMent Praefinium shares an insight on 2009 investment
“Those who cannot remember the past are condemned to repeat it”
S
antayana’s quotation is often used in moral discourses. Is this of any value with regards to your financial planning? If we compare the great depression of the 1930’s with today, using equity indices to replicate economic conditions as illustrated:
One may ask; is there a striking similarity? For some this creates anxiety, for others, opportunities; should you be concerned? Do you think history repeats itself? Before you run off and sell all your remaining stocks, we suggest that you first consider the differences between the 1930’s and current global economies. Some politicians will now praise their ‘bail-out spending’, but let us think differently. In the 1930’s, the world economy was largely dominated by the so called ‘Western economies’. What’s different today? Indeed, most ’Western economies’ have been diagnosed with the crisis virus. However, Asia’s share of the global economy is now significant. In these difficult times GDP growth rates have remained strong – for example: India’s GDP for 2009 is forecasted
as + 5.4 % by some and as high as 9% by others while western economies struggle to achieve positive growth at all. What if you expect that things will evolve differently from the 1930’s, are you prepared to take a ‘historic risk’? Investors who have survived the recent financial market bust with money to invest are all facing the same dilemma. Should I leave my money in the bank where interest rates are at historic lows? Do I have the confidence that my bank will be around in a year from now? If you are looking for alternatives, we suggest that you consider Indian equities.
Why is India different? To put it simply, there is solid domestic demand, this has been unleashed through significant buying power from the growing middle class. In addition, India is much like a crouching Bengali tiger in the form of growth from a significant agricultural sector.
Therefore, if you are looking to increase your wealth at a pace faster than your peers, we suggest that you consider an allocation to India into your portfolio. n Next month: How to participate in the Indian growth story
Alpesh B Patel a.patel@praefinium.com Praefinium runs an India Fund