Investing in India: Growing Pains or an Opportunity? – September 26, 2018

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Welcome to Episode #148 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is joined by Zacks Director of ETF Research, Neena Mishra, to talk about all things India.

Since the last time she was on the podcast, there have been further developments in the banking system, digital payments and with technology companies. Additionally, the rupee has sunk nearly 13% against the US dollar causing other difficulties.

What should investors be looking at if they want to invest in India?

The Reserve Bank of India Cracks Down on the Banks

On Sep 19, the Reserve Bank of India asked the founder and CEO of Yes Bank, the 5th largest Indian private sector bank by assets, to step down by Jan 31.

This was a shock to shareholders, who had recently voted him in for a another 3-year term.

Apparently, the reason for the sudden move was due to growing worries over non-performing loans as banks have grown quickly the last few years.

Most of the bank stocks have been hit in 2018 with HDFC Bank and ICICI Bank (IBN Free Report) trading down 10% and 11.8%, respectively.

Will “India First” Policies Slow Big Tech Growth?

After being shut out of China, which favored home grown technology companies, American social media and technology giants put their focus on India.

It is the second largest smart phone market in the world which means there’s increasing demand for apps and digital payments.

But India’s government has become increasingly concerned with the dominance of American technology companies over homegrown entities.

Facebook’s WhatsApp is the most popular phone app in India with over 200 million users.

Recently, there were regulatory proposals which would require technology companies to store user data inside the country, which would impact not just tech but financial service companies like PayPal, Visa and Mastercard.

Tougher privacy regulations are also being debated as well as new e-commerce and payment regulations.

A Trillion Dollar Market in 5 Years?

Digital payments are one of the fastest growing areas for technology companies in India.  

The biggest player is currently Indian company Paytm with about 10% of the market. It has over 95 million active monthly users.

Recently, Berkshire Hathaway (BRK.B Free Report) invested $300-$350 million in the company, valuing it between $10 and $12 billion.

Alphabet (GOOGL Free Report) launched Google Tez, now called Google Pay, in Sep 2017 and now has over 22 million active monthly users.

And then there’s PayPal (PYPL Free Report) which is going neck and neck with Paytm for market share, with 9.8%.

Some analysts expect digital payments to rise to a trillion-dollar market by 2023.

What else should you know about India right now?

Tune into this week’s podcast to get the scoop.

[In full disclosure, Tracey owns shares of FB and GOOGL in her personal portfolio.]

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