INDIA : A Perfect Multibagger for the 21st Century

There have been various research reports being published during the recently halted bull run that India would grow to become the second biggest economy by 2050. The reports invariably have been predicting the size of the Indian economy to be 40 trillion $ (on real terms) by 2050, next only to China. This would in turn mean that India would constitute for around 20% of the global output.

Though this seems to be a very long shot and commonly called day dreaming by many boarders, we at HBJ cap believe that this could eventually become a reality. This is not a new position for India to be in. Let’s just talk about our ancestors for a while. Just before the start of Industrialization in the world and the East India company rule in India (both in the late 18th century), India’s output has been an impressive 25% of the Global output. When US can multiply its economy by 60 times post World war 2 and China by 20 times (and still growing) in the last 20 years, we seriously believe the time has come for India to do its due respect.

India’s real GDP should be hovering around 1 trillion $ mark (top down from 1.3 trillion $ due to Re depreciation) this can go way up to the 40 trillion $ mark. Though a bunch of unexpected disasters could dampen the journey mid-way, there are more powerful drivers like the Favorable age demographics, Openness to trade and co operation, democratic profile of the country, increase in industrial productivity, sound financial markets (though a smaller one), increasing literacy rate, Urbanization … that could outweigh the risks.

Long term predictions always contain the risk of uncertainty. However, it is better to take the positive side in our case due to the drivers outweighing the dampeners. After all it is the commodity called Hope that drives most of us and the world. Though the assumptions include pro-economic policies from the government, tension free south Asia, reduction in poverty, stable political scenario, at least few years of 10 %+ GDP growth (which we expect sometime after 2010), a stable and appreciating currency, improvement in environmental conditions to craft the 40X concept, just look at the magnitude of the opportunities being thrown before us.

We see plenty of growth potential of staggering sizes in any of the sector you may think about. Just think of any space, be it Infrastructure, be it Environmental services, be it Automobiles , be it natural resources , be it Education we are looking at the story of Midas touch.

Taking a cue from the Mcap - GDP relation, the Mcap alone can potentially move from 0.6 trillion dollar (60% downside from the peak of 1.6 trillion $) to 40 trillion $, which translates to a 66 bagger. If the index can prove to be this explosive, you never know how many potential 100 baggers are out there currently.