Infrastructure... The Big Investment Story.

The elections' outcome have given a new wave of confidence globally in the Indian economy and with more than US$700 billion worth of investments to be channeled into India's infrastructure, power, telecom and pharma sectors over the next five years, this sector is well poised to reap the benefits.

The government is all set to make sure that the recommendations of the eleventh 5 year plan takes place and thus the Indian economy is on its growth trajectory . The total planned spending in the eleventh plan was about $275 bn and this can only be possible if the government ensure that the public-private participation framework is strengthened by creating the institutional framework for center-state coordination, financial closure, and viability gap funding. Above all since the government is already running into high budget deficits of over 10% of GDP it has to invite more private equity to fund the infrastructure growth.

Moreover investment in infrastructure provides a very good linkage effect for other sectors to go, because the lack of adequate power, road, railway and port infrastructure it is very difficult for other sectors to perform, creating a bottleneck to growth. India has faced a huge power shortage over the last few years which has increased from a low of 5.9% in 1998-99 to 9.5% in 9.5% in 2007-08, thus hindering the growth.

While theoretically India's potential economic growth could have being higher at 10%-plus, as in China, the slower-than-warranted response from policy makers to create the infrastructure supply was restraining "practical" potential growth. The government knows that if it is able to develop the adequate infrastructure the growth will follow but more - votes in the next elections.

The classic example is the number of seats bagged by Nitish Kumar in Bihar in the recent polls. After the years of Lalu raj in Bihar, when Nitish's Janta Dal was sworn into power it did a great deal of work to turnaround Bihar's ailing infrastructure. It left no stone unturned in building roads leading upto even the smallest of villages, improving irrigation and much more and the result- A SOUND VICTORY IN LOK SABHA POLLS.

Thus I believe its the right time to build up a portfolio of good infrastructure stocks and keep investing in it in SIP mode. Some of the good stocks I believe are good for long term investments given the upside potential of the sectors are L&T, GVK Power & Infra, GMR Infra, Supreme Infrastructure India Limited, Madhucon Projects and NTPC.

The reason I am saying that one should invest systematically and not at one time because this completely eliminates the market timing risk. Presently some of the mentioned stocks have rallied a lot over the last few weeks , however the upside potential is still there and thus with SIP investment there remains value to be unlocked.

Would be great if you people could also suggest some good Infrastructure stocks and your views on this sector.

HAPPY INVESTING