Indian stocks rose more in the first 100 days of Prime Minister Manmohan Singh’s leadership than under any new government since 1991. Investors predict more gains as he opens up the world’s second-fastest growing economy.
The Bombay Stock Exchange’s Sensitive Index climbed 16 percent since Singh started a second term on May 22 as international investors bought $4.9 billion more shares than they sold, data compiled by the bourse show. The advance is the biggest since the 40 percent rally after Prime Minister P.V. Narasimha Rao came to power, and compares with the 8.4 percent increase for the Standard & Poor’s 500 in the first 100 days of U.S. President Barack Obama’s administration.
Investors are optimistic Singh will accelerate road construction, ease limits on foreign ownership of banks and sell stakes in state companies. The economy may grow 9 percent annually in the coming three years, pushing the benchmark index beyond the record high of 21,206.77 reached in January 2008, according to Mirae Asset Financial Group, South Korea’s biggest money manager. The Sensex is 25 percent below that level.
“India is well-positioned to play the global recovery story,” said Gopal Agrawal, head of equities in Mumbai for Mirae, which has $2.5 billion invested in India and favors automobile, metal and oil stocks. “The policy framework is in place and we have to see how it’s executed and how the people will benefit.”
Sensex’s Rally
The Sensex has risen 65 percent this year to close at 15,922.34 on Aug. 28, and fell 0.7 percent to 15,813.10 as of 11:50 a.m. in Mumbai. It may reach 20,000 by March 2011, UBS AG analyst Suresh Mahadevan wrote in an Aug. 26 report. He advises buying Mumbai-based Tata Steel Ltd., the nation’s largest producer, and Mumbai-based JSW Steel Ltd., the third-biggest.
India’s economic growth accelerated for the first time since 2007, indicating the global recession’s impact on Asia’s third-largest economy is waning. Gross domestic product expanded 6.1 percent in the three months to June 30 from a year earlier after a 5.8 percent rise in the previous quarter, the Central Statistical Organisation said today. Economists expected a 6.2 percent gain.
Singh, 76, was educated at Oxford University and was governor of the central bank from 1982 and 1985. He was Rao’s finance minister and championed free-market policies such as cutting import tariffs and opening the stock market to foreign investors. In 2004, he became the fourth prime minister to run India since Rao.
Asset Sales
His coalition was reelected in May with a majority large enough to separate from communist allies, who had blocked plans for asset sales and the scrapping of a 10 percent cap on the voting rights of foreign investors in non-state banks.
Selling shares in state-owned companies is vital to fund the budget deficit forecast by the government to swell to 6.8 percent of gross domestic product in the year ending March 31, from 6.2 percent last fiscal year.
Oil India Ltd., the nation’s second-biggest oil explorer, plans to raise as much as 27 billion rupees ($552 million) by selling a 10 percent stake to the public starting Sept. 7, according to finance director T.K. Ananthkumar. NHPC Ltd., the leading hydroelectric power generator, is seeking 40 billion rupees in an initial public offering that started this month, Chairman S.K. Garg said.
Aggressive Reforms
“The government is going ahead aggressively with reforms,” said Pauli Laursen, a fund manager who oversees $150 million of Indian equities at SydInvest Asset Management in Copenhagen. “The IPO of a company like Oil India is a positive.”
Lower monsoon rainfall may undermine the rally by reducing farm output, according to Bank of America-Merrill Lynch, which predicted in an Aug. 17 report the Sensex could slide as much as 15 percent in coming months. India’s goods exports, which account for 15 percent of GDP, fell for a ninth month in June.
“We don’t see the level of confidence in emerging markets that we have been used to and India is no exception,” said Gavin Redknap, a strategist in London for Tokyo-based Nikko Asset Management Co., which oversees $6 billion in developing nations. “We aren’t seeing Indian equities at a level where we can call them attractive.”
The economy may expand faster than China’s next year because investors underestimate manufacturing and service industry growth, Puneet Nanda, an executive vice president at ICICI Prudential Life Insurance Co., with $6 billion in equities, said in an interview.
Faster Growth
Economic growth may exceed 7 percent in the fiscal year to March 31, and as much as 10 percent in the following year, Nanda said. China may expand 7.2 percent this year and 7.7 percent in 2010, the World Bank forecast on June 22.
The rupee, which dropped 3 percent in the past three months, may strengthen more than 5 percent to 46.22 per dollar by March 31, from 48.67 on Aug. 28, according to the median forecast in a survey of 20 analysts by Bloomberg News.
The rupee was set for its biggest monthly drop since February while the country’s seven-year bonds headed for their worst month since January, data compiled by Bloomberg showed.
Funds set up to target Indian stocks have attracted $1.2 billion more cash than was withdrawn since June 1, with nine consecutive weeks of inflows, according to Cambridge, Massachusetts-based research firm EPFR Global. Stocks in the Sensex trade for 18.7 times estimated earnings compared with the 21.4 times for China’s Shanghai Composite Index.
“India is under-priced compared to China,” said Venkatraman Anantha-Nageswaran, the global chief investment officer in Singapore at Bank Julius Baer & Co., which oversees the equivalent of $281 billion worldwide. “The relative performance gap in economies and assets markets between India and China will not only narrow considerably, but also move in favor of India.”
The Bombay Stock Exchange’s Sensitive Index climbed 16 percent since Singh started a second term on May 22 as international investors bought $4.9 billion more shares than they sold, data compiled by the bourse show. The advance is the biggest since the 40 percent rally after Prime Minister P.V. Narasimha Rao came to power, and compares with the 8.4 percent increase for the Standard & Poor’s 500 in the first 100 days of U.S. President Barack Obama’s administration.
Investors are optimistic Singh will accelerate road construction, ease limits on foreign ownership of banks and sell stakes in state companies. The economy may grow 9 percent annually in the coming three years, pushing the benchmark index beyond the record high of 21,206.77 reached in January 2008, according to Mirae Asset Financial Group, South Korea’s biggest money manager. The Sensex is 25 percent below that level.
“India is well-positioned to play the global recovery story,” said Gopal Agrawal, head of equities in Mumbai for Mirae, which has $2.5 billion invested in India and favors automobile, metal and oil stocks. “The policy framework is in place and we have to see how it’s executed and how the people will benefit.”
Sensex’s Rally
The Sensex has risen 65 percent this year to close at 15,922.34 on Aug. 28, and fell 0.7 percent to 15,813.10 as of 11:50 a.m. in Mumbai. It may reach 20,000 by March 2011, UBS AG analyst Suresh Mahadevan wrote in an Aug. 26 report. He advises buying Mumbai-based Tata Steel Ltd., the nation’s largest producer, and Mumbai-based JSW Steel Ltd., the third-biggest.
India’s economic growth accelerated for the first time since 2007, indicating the global recession’s impact on Asia’s third-largest economy is waning. Gross domestic product expanded 6.1 percent in the three months to June 30 from a year earlier after a 5.8 percent rise in the previous quarter, the Central Statistical Organisation said today. Economists expected a 6.2 percent gain.
Singh, 76, was educated at Oxford University and was governor of the central bank from 1982 and 1985. He was Rao’s finance minister and championed free-market policies such as cutting import tariffs and opening the stock market to foreign investors. In 2004, he became the fourth prime minister to run India since Rao.
Asset Sales
His coalition was reelected in May with a majority large enough to separate from communist allies, who had blocked plans for asset sales and the scrapping of a 10 percent cap on the voting rights of foreign investors in non-state banks.
Selling shares in state-owned companies is vital to fund the budget deficit forecast by the government to swell to 6.8 percent of gross domestic product in the year ending March 31, from 6.2 percent last fiscal year.
Oil India Ltd., the nation’s second-biggest oil explorer, plans to raise as much as 27 billion rupees ($552 million) by selling a 10 percent stake to the public starting Sept. 7, according to finance director T.K. Ananthkumar. NHPC Ltd., the leading hydroelectric power generator, is seeking 40 billion rupees in an initial public offering that started this month, Chairman S.K. Garg said.
Aggressive Reforms
“The government is going ahead aggressively with reforms,” said Pauli Laursen, a fund manager who oversees $150 million of Indian equities at SydInvest Asset Management in Copenhagen. “The IPO of a company like Oil India is a positive.”
Lower monsoon rainfall may undermine the rally by reducing farm output, according to Bank of America-Merrill Lynch, which predicted in an Aug. 17 report the Sensex could slide as much as 15 percent in coming months. India’s goods exports, which account for 15 percent of GDP, fell for a ninth month in June.
“We don’t see the level of confidence in emerging markets that we have been used to and India is no exception,” said Gavin Redknap, a strategist in London for Tokyo-based Nikko Asset Management Co., which oversees $6 billion in developing nations. “We aren’t seeing Indian equities at a level where we can call them attractive.”
The economy may expand faster than China’s next year because investors underestimate manufacturing and service industry growth, Puneet Nanda, an executive vice president at ICICI Prudential Life Insurance Co., with $6 billion in equities, said in an interview.
Faster Growth
Economic growth may exceed 7 percent in the fiscal year to March 31, and as much as 10 percent in the following year, Nanda said. China may expand 7.2 percent this year and 7.7 percent in 2010, the World Bank forecast on June 22.
The rupee, which dropped 3 percent in the past three months, may strengthen more than 5 percent to 46.22 per dollar by March 31, from 48.67 on Aug. 28, according to the median forecast in a survey of 20 analysts by Bloomberg News.
The rupee was set for its biggest monthly drop since February while the country’s seven-year bonds headed for their worst month since January, data compiled by Bloomberg showed.
Funds set up to target Indian stocks have attracted $1.2 billion more cash than was withdrawn since June 1, with nine consecutive weeks of inflows, according to Cambridge, Massachusetts-based research firm EPFR Global. Stocks in the Sensex trade for 18.7 times estimated earnings compared with the 21.4 times for China’s Shanghai Composite Index.
“India is under-priced compared to China,” said Venkatraman Anantha-Nageswaran, the global chief investment officer in Singapore at Bank Julius Baer & Co., which oversees the equivalent of $281 billion worldwide. “The relative performance gap in economies and assets markets between India and China will not only narrow considerably, but also move in favor of India.”
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