Jayant Bhandari: The Gold Trend in Asia Continues! Short The Indian Stock Market!
This week’s interview is with Jayant Bhandari, an institutional advisor specializing in the natural resource sector. Jayant is a frequent traveller, and as he puts it, he travels the world to understand how it works. His insights into the precious metals markets in Asia was the reason we got him on the show. He is also interested in the Indian stock market, but with a different approach than most, he believes it should be shorted…
We asked Jayant about the Indian Government’s measures to restrict gold imports, and how this affect the gold demand in India. Jayant says that it’s important to understand that in western countries, 90% of the rules gets implemented, but in a country like India, nothing gets implemented. It all converts into corruption. The result is that most of the gold is coming from smuggling, so much that the price of gold in India is lower than it would be officially, if you add the import duty on the international price.
On the subject of investor demand in India, Jayant says that investment demand will become visible after the Indian wedding season, which ends on the 7th of July. Then, investors will know what is happening with the investment demand aspect of the gold market in India.
Next we discuss the Indian stock market. Jayant says the profit yield you get from the Indian stock market is about 7-8%, or even lower, while the inflation rate in India is about 9-10%. So, you are making less money investing in the stock market, than you are by depositing your money in the bank. In the shadow banking system you get twice or triple interest rates, so why should anyone be investing in the stock market? Indian companies are loaded with debt, so if the Indian currency falls again, they will have a huge problem meeting their international debts.
Most of the euphoria in India is accompanied by western institutional investors, who think that Modi, the current Indian prime minister, has a magic wand. Western people think that through political implementation you can correct a system, in India you cannot correct the system. Corruption is all over the country, it is very wide and very deep, it goes all the way into the culture and the society, it’s very difficult to get rid of it.
A lot of people want to buy gold and want to buy property in India, and that is where most of the money goes today, the problem is that property is extremely expensive, and a lot of Indians could have trouble buying gold, particularly if the gold price goes up. In regards to gold purchasing in China, Jayant see a lot of gold shopping in Hong Kong and in Chinese cities.
Jayant resides in Singapore, and on the subject of the popular trend of storing precious metals in the country, he says that Singapore removed the sales tax on gold, and the reason was to make Singapore a hub for trading gold. Also, there is now a gold refinery operating in Singapore, so the country wants to make itself a centre for gold imports and exports.
Finally, Jayant touches on the long term trend for the mining equities. Jayant prefers the junior mining companies, and the exploration companies in particular, which he says can go into hibernation, if the metals prices do not justify investing in these mines.
Jayant is constantly traveling the world to look for investment opportunities, particularly in the natural resource sector. He advises institutional investors about his finds. Earlier, he worked for six years with US Global Investors (San Antonio, Texas), a boutique natural resource investment firm, and for one year with Casey Research. Before emigrating from India, he started and ran Indian subsidiary operations of two European companies. He still travels multiple times a year to India. For more information, visit: www.jayantbhandari.com.