While many other Indian equities have a large, concentrated
exposure to either the slowing developing countries or their own
domestic economy (
INDY
,
quote
), Tata Motors (
TTM
,
quote
) offers investors access to the Indian economy without the
problems plaguing other stocks thanks to its global
diversification.
[caption id="attachment_65607" align="alignright" width="300"
caption="The Nano could still be a hit with the Indian middle
class"]
[/caption]
Mumbai-based Tata Motors is an automobile and truck manufacturer
that produces vehicles designed for a variety of sectors and
regions. On the other hand, companies like Infosys (
INFY
,
quote
) are highly dependent on the performance of the American and
European economies as this is where these companies generate a
substantial portion of their income, whereas Tata Motors has the
benefit of generating profits from both both developed and
developing economies.
While Tata Motors also has exposure to developed countries
through its Range Rover and Jaguar brands
, these high-end models cater to the upper classes, which are still
performing well in spite of middle-class stagnation, while Infosys
is more dependent on the American and European economies as a
whole.
Domestic Indian banks are also far worse positioned than Tata
Motors over the short-to-medium term. Banks like ICICI (
IBN
,
quote
) are highly exposed to the
domestic Indian economy, inflationary pressures, and the
deteriorating credit quality in the Indian economy
.
The slowing economy is certainly not helping domestic sales, but
Tata's exposure to the increasingly large middle-class will
continue to boost sales over the long-term. Even if the Indian
economy is unable to return to its previous outsized growth rates,
the middle class will still grow, albeit at a slower pace. And,
with Tata Motors' reasonably priced offerings, the company is well
positioned to take advantage of this demographic trend.
As a result, investors looking to play India could consider
going long Tata Motors with its considerable
geographic and sector diversity
against an Indian bank like ICICI which is set to underperform
until the Indian government gets its act together.
