India’s Nifty Futures Gain a Second Day in Singapore on Poll
By Pooja Thakur and Chen Shiyin
May 19 (Bloomberg) -- India’s stock index futures climbed 6.4 percent in Singapore, extending record gains yesterday on speculation the ruling party’s election victory will advance reforms to boost economic growth.
The SGX CNX Nifty Index futures for May 2009 delivery rose 280 points to 4,650 at 11:07 a.m. in Singapore today, after rising 19 percent yesterday. The contract is derived from the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India Ltd.
The benchmark Sensitive Index, or Sensex, yesterday jumped by a record 17 percent on the Bombay Stock Exchange, bonds rose and the rupee gained the most in two decades after Prime Minister Manmohan Singh’s Congress Party won the nationwide elections. Share trading was halted for most of the day for the first time ever because the Sensex breached the upper limit set by the market regulator.
“India has been our long-time favorite,” said Chong Yoon- Chou, investment director at Aberdeen Asset Management Asia Ltd., which has $27 billion of assets. “We’re very happy with the things that are going on in India following the elections, but we’ve also always found interesting companies there.”
iShares MSCI India, an exchange traded fund, rose 8.2 percent to $5.68 in Singapore. The units soared 19 percent yesterday, the most on record. Indiabulls Properties Investment Trust, an owner of real estate in the South Asian nation, rallied 10 percent to 38.5 Singapore cents, adding to yesterday’s 25 percent jump.
‘Overstretched’
Stocks may extend their record rally this week before falling as shares are too costly, given the outlook for economic growth and earnings, said UTI Asset Management Co., the nation’s oldest money manager.
“Markets can go up some more but valuations are looking overstretched,” Anoop Bhaskar, equities head at Mumbai-based UTI, which oversees $11 billion of assets, said in an interview.
The gains yesterday pushed shares to 15.56 times earnings, twice the 7.7 multiple six months ago, according to data compiled by Bloomberg.
India’s growth may weaken to 6 percent in the year that started April 1, the slowest pace since 2003, the central bank said last month. Asia’s third-biggest economy expanded 5.3 percent in the quarter through Dec. 31. Factory output in March shrank the most in 16 years as exports plunged by a record.
The government is seeking to maintain annual growth rates above 8 percent for two decades to reduce poverty. Profits at Indian companies may expand at a pace of 11 percent or less next year, Bhaskar said.
‘Recklessly Bullish’
“It’s okay to be bullish on India, but not recklessly bullish,” said Ajay Bodke, who helps manage $3.4 billion in assets at IDFC Asset Management Co. in Mumbai. “We are not in 2007; we are no longer living in an era of easy liquidity.”
The Sensex extended its year-to-date gain to 48 percent, edging ahead of Brazil and China from last among the four so- called BRIC countries that include Russia. The Bank of New York Mellon India ADR Index rose 16 percent in New York, the most since October, led by the nation’s biggest banks.
Singh will start forming a new government without needing the support of communist lawmakers, who frustrated plans to entice foreign investment and sell state-owned companies in his first five-year term. The government will need to bolster an economy that’s slowing as the global recession saps demand for Indian goods.
India’s post-election rally may last for a few weeks at the most, as the government battles an economic slump, said Gautam Prakash, founder of Monsoon Capital LLC with about $500 million of Indian assets.
Rupee’s Climb
The rupee climbed 3.1 percent against the dollar yesterday, the most in more than two decades, and the benchmark bond yield fell 16 basis points, the biggest decline in a month. A basis point is equal to 0.01 percentage point.
Bhaskar said valuations may not be sustainable as earnings growth at Indian companies may not exceed 11 percent next year. Kotak Securities said in a note yesterday the stock rally has prevented “a more aggressive view” because there aren’t signs of improving earnings.
Indian stocks are trading at 14.6 times earnings for the year ending March 31, 2011, IDFC’s Bodke said.
India’s stocks were upgraded to “overweight” from “underweight” at Morgan Stanley, which said it was the first time the brokerage’s so-called country quant model recommended an overweight rating on the nation’s shares. Morgan Stanley said the Sensex may rise to 15,300 this year. It closed at 14,284.21 yesterday.
The ruling government has unveiled three stimulus packages since December, including lower retail fuel prices, taxes on consumer products and injecting capital into state-run banks, to shield the economy from the global crisis. With almost twice as many seats as the main opposition, Singh may further reduce barriers to foreign investment in insurers and retailers, plans that had been blocked by communist lawmakers.
To contact the reporter on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net; Chen Shiyin in Singapore at schen37@bloomberg.net
Last Updated: May 18, 2009 23:29 EDT |
