Indian Retail Sector

Indian Retail Sector: Can Indians Spend Like Americans?
by Joel Bowman
The Rude Awakening
Wall Street, New York
Sunday, December 4, 2005

Joel Bowman recalls a conversation with James Boric about the possibilities of the Indian Retail Sector.

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Joel Bowman, reporting from Baltimore...

Chances are, you have already seen the headlines and read
the seemingly impossible statistics. To say the growth of
the Indian economy over the past few years has been
astounding would be a vast understatement.

Last month the BSE Sensex (the Indian stock index) rose
11.35%, trampling its way to a new high of 9000. That
coupled with the slathering of headlines touting India as
the next China would seem only to dissuade a proven
contrarian investor like James Boric.

Au contraire!

Using his inside connections and working closely with
renowned Indian economist, Sala Kannan, James has uncovered
what he has termed "India's $200 billion secret." While
everyone else is working themselves in to a frenzy over
outsourcing, tech and pharma stocks, James, as he is wont
to do, has been taking the path less trodden.

I cornered James for a few minutes this morning to get the
scoop on the India nobody else is looking at...

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Can Indians Spend Like Americans?
By Joel Bowman

"We can usually use the headlines of The Economist and
BusinessWeek to predict where you are NOT looking, James.
Don't tell us you have flown the contrarian coop?"

"Ha ha...Well, the India I'm looking at is not the same
India everyone else is crunching their numbers over,"
corrects our friend and revered investment analyst, James
Boric. "This one is going to be big. I mean billions," he
enthuses. "With the correct investment strategy and a few
solid stocks Sala Kannan, a renowned Indian analyst, have
discovered, I think investors stand to make a considerable
amount of money here. This is going to be huge."

We don't doubt James's earnest tone for one moment. After
all, we have sat through countless meetings with him over
the past few months, listening to him rant and rave about a
angel in to one of the world's fastest growing economies
that nobody knows about. So if it's not the tech stocks, or
the pharma plays or even the outsourcing that has got the
small-cap guru aflutter, what is it?

"Retail, retail, retail," reveals Boric.

Indian Retail Sector: Why the Indian Retail Sector

We obviously didn't do a very good job of keeping the
perplexed expression from our face as James quickly
explains his reasoning.

"Prime Minister Singh is set to open the floodgates for
foreign investment dollars. He is already meeting with the
big players like Wallmart, GE, Bill Gates and even
President Bush. The major corporations are jostling in line
for their chance to pump billions in to the Indian retail
sector...they're just awaiting Singh's go-ahead."

"And this is on the cards?" we inquire.

"Singh has about as solid a track record as you will find
encouraging foreign investment and competition. He's only
been in office since 2004 and already he has increased
foreign investment by 23%. He has opened up key Indian
sectors that used to be off limits to foreigners. And he
has vocally announced that he wants the retail sector to
open its doors to foreign investment as well. The only real
question is when he will make the announcement – not if. 
It could happen within the next few months. It could take a
couple of years. We'll just have to wait and see"

"So what happens when people catch on here and realize
there is money to be made?" We wonder out loud.

"My guess is that people will be clamoring to get on board.
Just look at what happened when China did the same thing
back in '92. As soon as the retail sector was open to
competition from foreign investors stocks soared to
ridiculous highs, wholesale and retail trade went up almost
400% and wise investors that saw it coming made a fortune."

Wow, and we thought only Americans could spend like
Americans! So it seems like a no brainer – a huge influx of
foreign capital, sharp increase in competition, historical
comparisons – why isn't everyone throwing their money at
the McIndia phenomenon?

"Well, I think investors are wary. They are mindful of
volatility in the Indian market. If you look at the charts
from the past 10 years, there have been huge rallies
followed by some massive corrections. People may be worried
that it's just too risky, and for the short term I think
they are right. I am looking at long term plays, plays that
will see large gains out of the gate, but that will
continue to climb on the back of a strong economy." James
assures us.

Indian Retail Sector: The SEBI Act

Call us paranoid here, but could some of this volatility be
due to corruption and the like?

"In the past, yes. After a particularly large correction
back in '92, one that saw a lot of people cleaned out,
India introduced the Securities and exchange Board of India
(SEBI) Act. The objectives and functions of the Securities
Exchange Board are very similar to the SEC in the U.S.
Their accounting laws are also much stricter than the ones
we are regulated by here. Obviously you can never rule out
the possibility of corruption completely, but I think it is
a much safer place to invest now."

Can we expect news of holiday pandemonium at the India
Macy's next holiday season?

"Perhaps. There is no doubt what is going to happen in
India...It WILL open up its retail sector. Singh has proven
he is for a free-market, that he is pro-competition. As the
PM of India, I have no doubt what he will do. Keen
investors are going to make a tidy sum on this one."

So, can we safely assume that you remain a contrarian to
the core still?

"While everyone associates India with technology and IT, I
am looking at the real opportunity - which is a $200
billion announcement that isn't on anyone's radar screen.
There isn't a news team in America that is following this
event in the making...but it's headline news in India. You
show me any other American analyst who is following this
story...There isn't one I think that makes me a
contrarian."

Cheers.

P.S. You can grab a copy of the India report, Gateway to India: 
India's $200 Billion Secret Revealed, by clicking the link
below. This is fresh off the print and will likely get snapped
pretty quickly, so get in before everyone else snaps it up :

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And this week's Rude Reading...

Gold is the new "Gold"
By Dan Denning

How can the dollar strengthen, even while America's
monstrous deficits are growing? And how can the dollar
strengthen, even while gold is rallying? The readers of my
investment letter, Strategic Investments, have been asking
many questions like these over the last few weeks.

www.the-rude-awakening.com/RAissues/2005/Nov/RA120205.html

Golden Nematodes and "Active Adults"
By Dan Ferris

"Every 7 seconds another boomer turns 50," BullMarket.com
reports. "There were approximately 78 million baby boomers
born between 1946-1964. The numbers increase 56% every
year, and will until 2011. As the largest consumer spending
group - $900 billion a year, boomers will control the vast
majority of the nation's wealth within the next 20 years."
One likely beneficiary of all that spending will be...

www.the-rude-awakening.com/RAissues/2005/Nov/RA113005.html

Million-Dollar Magic
By James Boric

Joel Greenblatt is not famous...He is merely rich.Last
week, I discovered why he is so rich. My discovery could
easily put a few extra dollar bills in your pocket as
well...Maybe even millions of dollar bills.

www.the-rude-awakening.com/RAissues/2005/Nov/RA112905.html

[Joel's Note: We don't know about you, but we are spent!
Last night your rhythmically challenged junior editor
ventured out of his safe zone and found himself jiving and
grooving to a style of music known as "afro-beat". There
were plenty of far more coordinated, dexterous human bodies
moving to the music, which only served to highlight our
utter afro-beat ineptness.

The venue was a dilapidated old warehouse that was
accessible only by a closed off road and warmed by nothing
more than the revelers body heat. It was well in to the
second set when we received the call from Mr. Boric to
reschedule this morning's interview – for earlier!

As always, we hope you enjoyed the insights from James and
your entire week of Rude reading. Be sure to check the
website regularly for special offers and new "What's Hot"
stocks that are posted. You can bookmark the site for easy
access too. Just go to www.the-rude-awakening.com and ad us
to your favorites to ensure you are only a click away.

As for this dance-weary editor, we're off to bed.

Cheers,

jOEL

And the Markets...