Invest in Indias Boom with These Penny Shares

I’ve been thinking about Asia this week...

It started with a phone call to my network provider about a query on my phone bill.

I'm sure the following has happened to you...

Your call is taken by a friendly woman with a distinct accent.

After some short pleasantries, she walks you through your bill step-by-step - from a call centre halfway across the world in India.

It's the embodiment of a powerful emerging trend.

As Charles Sizemore wrote in the Daily Reckoning recently... the "power of information technology has allowed ( India's) new economy to largely bypass the state and its rickety infrastructure altogether. It has also brought unprecedented wealth to India's educated middle class while supplying the West with a vast supply of skilled knowledge workers at a fraction of the price it would cost at home."

I believe now it is the best time to be investing in India... and in fact, the Red Hot Penny Share's team is currently scoping out a stock on AIM that could easily triple as this hot new market begins to really shine.

I'll give you some more details of this in a moment, but first let's put all the facts together...

India 's middle class is growing but the social divide has never been more keenly felt

India has nearly 1.1 billion people living there. It's the second largest country on earth by population, and the seventh largest in size – over 1.1 million square miles.

It has one of the fastest growing economies in the world – it's grown an impressive 8% per annum over the last 3 years alone!

The wealthier nations have already highlighted India as a trading partner with enormous potential. And I believe it's the right time for private investors to follow suit.

But NOT by blindly buying any Indian stock at the drop of a hat.

Although the country has seen record levels of growth in recent years much of India remains blighted by poverty...

Most of India's roads are in abysmal repair, and the traffic congestion in most cities is bad enough to make Los Angeles rush hour look like a walk in the park. Moreover, living conditions for large segments of India's population are appalling.

The Financial Times reports that there is one toilet for every 1,500 people in some of the poorer parts of Mumbai (previously known as Bombay).

And in sharp contrast to some suburbs in New Delhi – home to international call centres and IT firms, complete with shiny skyscrapers, gleaming office blocks and modern shopping centres, where locals dine in fancy restaurants and shop for new cars or Samsung electrical goods - just around the corner lay sleepy shanty towns where water buffalo wander the streets aimlessly.

The class divide has never been more keenly felt.

But India is still leading the way by planning to skip the industrial age to march forthright into the information age.

And then there's China...

There has been increasing talk in the City of a strategic partnership between India and China - the two Asian economic giants.

India seeks to be a major player in the computer software world in the same way that China is in the area of hardware and production.

Imagine the strength of a tie-up between New Delhi and Beijing, and how dominant a force they could become in the IT market...

But what you really want to know is, how can you get a piece of the action?

Well, quite easily really...

As I said earlier there are many Indian companies listed on the AIM market. But picking the right ones is the tricky part – because as you’re probably aware, there can be some real dogs out there.

Our favourite one right now is currently under some intense research for a possible showing in the Red Hot Penny Shares' portfolio at some point over the next few months.

Now obviously I'm not able to disclose the name of the company but this little fire-starter has just announced that they are on target to achieve saleable gas production by the middle of 2007.

Their first program of 20 wells is nearing completion, and they are making good progress on the next 20 wells.

They were in fact the first Indian company to list on AIM in December 2005, and they have really made an impact.

They're currently exploring and developing production wells for coal bed methane in West Bengal.

But here's the juicy bit...

They've already struck gas, and are currently carrying out tests, which look very promising indeed.

What I love about this company is that at the same time as making money, they are also thinking about the environment by using processes to curtail further damage to the ozone layer.

Timing is everything

What's so refreshing about this play is that they've actually achieved their goals set out when they first came to market – and as you will know, this is so very often not the case.

Empty promises lead to falling share prices. Not with this baby. So far so good.

And if it carries on the way it's going it could set your portfolio on fire.

But we will tread with caution.

Although this business is listed in London, the majority of its work is dependent on overseas economies. And despite the overwhelming bullish case for India over the coming decades, you have to remember that India is still an underdeveloped country.

As Charles said: "( India's) per capita income is still pitifully low, on par with Iraq or Cuba, and India's government is certainly not immune from the occasional populist rash of anti-globalisation sentiment.

"It's unlikely that India would ever follow the example of, say, Venezuela, but there will definitely be setbacks that rattle investors. Even the United States, with its long tradition of free trade, has fallen into this trap recently, as the political grandstanding that killed the Dubai Ports deal in early 2006 made abundantly clear.

"Any political manoeuvring in India or one of its major trading partners that undermines free trade could cause ugly - though most likely temporary - setbacks."

You also have to bear in mind that India has an unresolved conflict with Pakistan that could erupt into war at a moment's notice.

Yes, India is as volatile as hell. Just this summer saw a 30% drop in Indian stocks when the May correction swooped on the money markets.

Hindsight tells us this would have been a great time to buy.

And that's just it... timing is everything.

Bye for now,

Melissa Carroll

for The Penny Sleuth