News / Asia

As Indian Market Optimism Soars, Room for Disappointment Grows

Indian stockbrokers celebrate as they watch the Bombay Stock Exchange (BSE) index on their trading terminal in Mumbai, India, May 13, 2014.
Indian stockbrokers celebrate as they watch the Bombay Stock Exchange (BSE) index on their trading terminal in Mumbai, India, May 13, 2014.
Reuters
Investors added to bets that Indian opposition leader Narendra Modi would score a decisive election win, sending markets to fresh highs on Tuesday at the same time as piling pressure on the next government to deliver swift results on the economy.
 
Exit polls for the world's biggest election indicate that voters have turfed out the coalition government led by the Congress party, which has presided over a slump in economic growth and been troubled by a string of corruption scandals.
 
More than half a billion people voted in five weeks of staggered balloting - the largest ever exercise in democracy. The vote wrapped up on Monday and official results will be announced on Friday.
 
Indian shares posted fresh record highs on Tuesday and the rupee hit a 10-month peak after the polls bolstered expectations that Modi's Bharatiya Janata Party (BJP) and its allies would clinch the 272 parliamentary seats needed for a ruling majority.
 
“The market is now kind of priced to perfection,” said Ritesh Jain, chief investment officer at Tata Asset Management.
 
Those projections may have altered expectations ahead of the actual results, according to some brokers and investors.
 
They now say that even a number of 240 seats or below, which until Monday had been widely forecast, would prove disappointing to markets.
 
Exit polls in India are notoriously unreliable and in the past two elections have overstated the BJP's seat haul, which some observers attribute to a greater willingness by urban BJP supporters to state which party they voted for.
 
The left-leaning Congress party's base tends to be poor and rural.
 
“The base for the base case has shifted and the market is now in for an even trickier Friday than it was yesterday,” Rahul Arora, chief executive officer of the institutional equities business of brokerage Nirmal Bang, wrote in an email to clients.
 
Gujarat model?
 
Investors hope Modi will drive home a pro-growth agenda the way he did as chief minister of Gujarat state, where he has enjoyed an electoral mandate that he would not have as prime minister even under the most optimistic scenario for his party.
 
Other uncertainties include a central bank governor who last week vowed to maintain his focus on inflation at a time when the BJP and its partners in the National Democratic Alliance (NDA) have campaigned on reviving economic growth.
 
India's NSE index jumped as much as 2.3 percent to 7,172.35 points on Tuesday and has soared by nearly a fifth since Modi became the BJP's candidate for prime minister on Sept. 13.
 
Some in the market warn that investors will need to see more proof that corporate earnings are on the mend before pushing  shares up much further, even as forward price-to-earnings multiples are historically inexpensive at around 15 times.
 
The rupee, meanwhile, hovered near a 10-month high and 15 percent above the record low hit in late August when India was gripped by its worst market turmoil since a balance of payments crisis in 1991.
 
Further rupee gains could prove elusive as the Reserve Bank of India (RBI) has been buying dollars in a bid to bolster its foreign exchange reserves.
 
Bond investors will focus on the RBI's monetary policy review on June 3 after central bank Governor Raghuram Rajan on Friday reiterated that he - and not the Indian government - was responsible for setting monetary policy.
 
Although Rajan is expected to keep interest rates on hold next month after data on Monday showed consumer inflation rising only a tad in April, any big uptick in food prices could trigger central bank tightening, analysts said.
 
Investors, and credit rating agencies, will also closely examine the policies of any new government at a time when the country's fiscal deficit is being contained by measures such as curbs on gold imports that may prove unsustainable.
 
“A lot needs to be done in terms of political, fiscal and economic reforms. Earnings also need to catch up,” said Aneesh Srivastava, chief investment officer at IDBI Federal Life Insurance. “A lot would depend on policies and decision-making.”

You May Like

Anti-Terror Drills Highlight China’s Push Into Central Asia

China, Russia, several central Asian countries wrap up massive anti terrorism military drills in Inner Mongolia More

Erdogan’s First Step: Secure More Power in New Role in Turkey

Erdogan was sworn in as Turkey's first popularly elected president on Thursday; he picked former foreign minister Ahmet Davutoglu as PM More

Pakistan Army Fails to Break Political Deadlock

PM Sharif claims he didn't ask army to defuse crisis; military rejects claim More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Ukraine Battles Pro-Russia Rebel Assaulti
X
Daniel Schearf
August 29, 2014 9:30 PM
After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.
Video

Video America's Most Popular Artworks Displayed in Public Places

Public places in cities across America were turned into open-air art galleries in August. Pictures of the nation’s most popular artworks were displayed on billboards, bus shelters, subway platforms and more. The idea behind “Art Everywhere,” a collaborative campaign by five major museums is to allow more people to enjoy art and learn about the country’s culture and history. Faiza Elmasry has more.
Video

Video Chinese Doctors Use 3-D Spinal Implant

A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video India’s Leprosy Battle Stymied by Continuing Stigma

Medical advancements in the treatment of leprosy have greatly diminished its impact around the world, largely eliminating the disease from most countries. India made great strides in combating leprosy, but still accounts for a majority of the world’s new cases each year, and the number of newly infected Indians is rising - more than 130,000 recorded last year. Doctors there say the problem has more to do with society than science. Shaikh Azizur Rahman reports from Kolkata.

AppleAndroid