One of the more intriguing developments in the old portfolio has been the recent strong performance of my shares in the JP Morgan Fleming Indian Investment Trust, to give it its full, overlong title.
I've been making a modest monthly payment into a savings scheme for this fund for a couple of years, during which time the shares have marked time in a range of about 45p to 55p, although they had been volatile before. Recently, they have scaled the dizzying heights of 65p to 70p. This is about where they stood in 2000 but not bad for more recent investors.
Those of us who have survived other investment fads (including the last emerging markets boom in the mid-1990s) have to pause at moments like this and ask what is going on. Is India, in other words, about to become the latest hyped place to put your money, or is something more fundamental going on?
Both could be true, of course, in the sense that lots of fads are just the products of people getting vastly overexcited about some fundamentally good story. What happened in the dot.com boom was probably an example of that. The heights scaled by some of those companies may be seen again, but it may take 25 years rather than 25 weeks for them to experience another 10-fold increase in value.
I'm happy with the record-breaking performance of lastminute.com now well above 200p , considering I bought a few as no more than a casual punt at I think 38p. But I digress.
India is an interesting story. Just look at everyone from MG Rover (see elsewhere in this section) to HSBC (call centres) turning there for its obvious natural advantages of cheap, often well-educated and English-speaking labour. Long in the shadow of China's rapid economic development, the Indians' national pride obviously couldn't take it any longer and they have set about (slowly) dismantling their old protectionist and madly bureaucratic semi-command economy.
They're not there yet, and there is the ever-present threat of instability in the region, particularly in Pakistan. But long term, India ought to be able to offer excellent prospects. Another factor is that there are as yet very few retail vehicles for investment in India. The JP Morgan Fleming Trust, a £50m fund, is one but there seem to be few others, as yet, so its shares might get overheated just because it's the only easy route into the sub-continent.
I don't expect much of a divi soon from my Indian investments, and, talking of divis, I was very struck by an article that appeared in this paper last week by my distinguished colleague Hamish McRae. It was a characteristically thoughtful piece. (Do I get my OBN, Order of the Brown Nose, now?). For Mr McRae pointed out that while lower interest rates are usually headlined as "good news" they are not good news for everyone. In the case of savers, a cut in rates is bad news.
Looking more widely, it is possible the downward pressure on rates might be good news for markets as a whole, as people turn to blue chips to provide a steady and, possibly growing dividend. There again the recent experience of cancelled or postponed dividends (Abbey National, Reuters, Prudential) might mean people still view equities with a degree of caution, as well they might.
But no dividend is guaranteed. It is strange to reflect that before the "cult of the equity" shares were often bought solely for their yield and they had to provide reasonable risk premium. Some say those days are coming back. If they are, it's because the market can provide investors with such as Alliance & Leicester (yielding 4.9 per cent), Barclays (4 per cent) and Royal bank of Scotland (2.9 per cent), all of which managed to provide dividend growth of more than 10 per cent.
Lloyds TSB maintained its divi, giving a yield of 7.4 per cent. So buying shares in these banks will probably offer a better return than their savings accounts.
In the lower reaches of the market there's also the likes of Nichols, the Vimto firm offering a 7.8 per cent yield, or AG Barr (Irn Bru) on 4.4 per cent . And we're having such a hot summer, it must be nearly as warm as India.Reuse content