India stocks rallied strongly in 2019, with large companies leading the way. During this past earnings season, many of the country’s companies have reported very strong results. Earnings of about 120 companies on the Indian stock exchange more than doubled year-over-year. 30 of the 50 companies on India’s Nifty Exchange beat average estimates.
Meanwhile, India’s economy reportedly generated the world’s fifth-largest GDP last year and is becoming more capitalistic. So far this year the nation’s stock market is little changed. India’s economic growth is expected to slow in 2020 amid China’s coronavirus outbreak, but the Indian economy is still expected to expand 5% in 2020. The country has been largely untouched by the outbreak, making it a very good place to invest.
Cognizant Technology (CTSH)
A consulting company that was founded in India and still has many offices there, Cognizant focuses on IT projects. Although you may not have heard of Cognizant, it’s not a fly-by-night firm; it’s a Fortune 500 company and was named one of the world’s best 100 digital companies by Forbes in September 2018.
Given the company’s Indian roots, Cognizant is very well-positioned to recruit highly skilled but relatively affordable Indian IT professionals. The company is also well-positioned to benefit from the strong growth of the Indian economy.
As more companies turn to new technologies like the cloud, AI, and the Internet of Things, they’re using consulting firms like Cognizant to shorten the learning curve.
For example, Network Rail, which lays railroad track in the U.K., is partnering with Cognizant on an AI project to facilitate its track maintenance efforts. Cognizant was also recently selected to help New York’s giant electricity utility, Con Ed, modernize its technology by implementing cloud and Internet of Things systems.
Cognizant’s Q4 EPS, excluding some items, climbed over 7% year-over-year in Q4 and its revenue climbed nearly 4% YoY. CTSH stock has a forward price-earnings ratio of 15.5, which is quite reasonable, given the company’s growth.
ICICI Bank (IBN)
One of India’s largest banks, ICICI Bank, has a market cap of roughly $46 billion. After two large Indian non-bank lenders went under last year, Indian banks had trouble getting funding. But that situation has improved, and ICICI Bank should benefit from less competition on the lending front going forward.
Also likely to boost ICICI is a trend of businesses increasingly turning to private banks instead of state-run banks. According to Barron’s, multiple interest rate cuts by India’s central bank “won’t hurt” ICICI. I’m sure they won’t hurt IBN stock either.
In extremely encouraging news, the bank’s profit nearly tripled year-over-year last quarter, “helped by a rise in retail loans and improving asset quality,” according to Reuters.
Moreover, its non-performing assets fell to 5.95% of its total assets, down from 7.75% during the same period a year earlier. And its net income surged to 94.8 billion rupees over the last year from 42.5 billion rupees during the year ended last March. Given its growth, the bank’s forward P/E ratio of 17.5 is attractive.
Cheniere Energy (LNG)
In 2018, Cheniere, which exports U.S. natural gas, began implementing a 20-year deal to deliver natural gas to India’s state-owned utility, Gail. The Indian company agreed to buy 3.5 million metric tons of natural gas per year from Cheniere.
Encouragingly for Cheniere, in March 2019, Gail’s CEO said that the company was looking to import more natural gas in 2024 and 2025. As the owner of two of four existing gas export ports in East Texas and Louisiana, where much of the country’s natural gas is extracted, Cheniere is poised to make an additional deal with Gail.
An Indian official said that by 2030, natural gas is anticipated to generate 15% of India’s energy, up from 6.2% as of last March, Reuters reported.
Nor is Gail the only player in the Indian natural gas market. Indian Oil Corporation signed a memorandum of understanding with Exxon (NYSE:XOM) to explore natural gas import deals. Meanwhile, Exxon has already made a deal to supply natural gas to Petronet, which is actually India’s largest importer of natural gas.
There is a good chance that Cheniere will make a deal to export natural gas to Indian Oil and Petronet in the medium-term.
Cheniere is also likely to benefit from China’s commitment to buy $52.4 billion of energy exports over the next two years. White House economic adviser Larry Kudlow told Bloomberg:
… Chinese President Xi Jinping had reaffirmed Beijing’s commitment to make the purchases required by its trade deal with the U.S., despite the coronavirus from China outbreak.
Moreover, China showed its desire to implement the deal by slashing its tariffs on America’s energy exports.
Other developing countries looking to switch from coal to natural gas to cut their pollution are likely to make deals with Cheniere in the medium-term, boosting LNG stock.
As of this writing, Larry Ramer did not own shares of any of the aforementioned companies. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.