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

    Top US General: Turkish Media Report ‘Absurd'

    General Dunford rejects ‘irresponsible' claims of coup involvement by former four-star Army General Campbell, who led NATO forces in Afghanistan before retiring earlier this year

    Video Saving Ethiopian Children Thought to Be Cursed

    'Omo Child' looks at efforts of one African man to stop killings of ‘mingi’ children

    Protests Over Western Troops Threaten Libyan 'Unity' Government

    Fears mount that Islamist foes of ‘unity' government plan to declare a revolutionaries' council in Tripoli

    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.
    London’s Financial Crown at Risk as Rivals Eye Brexit Opportunitiesi
    X
    VOA News
    July 25, 2016 5:09 PM
    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Calm the Waters: US Doubles Down Diplomatic Efforts in ASEAN Meetings

    The United States is redoubling diplomatic efforts and looking to upcoming regional meetings to calm the waters after an international tribunal invalidated the legal basis of Beijing's extensive claims in the South China Sea. VOA State Department correspondent Nike Ching has the story.
    Video

    Video Four Brother Goats Arrive in Brooklyn on a Mission

    While it's unusual to see farm animals in cities, it's become familiar for residents of Brooklyn, New York, to see a little herd of goats. Unlike gas-powered mowing equipment, goats remove invasive weeds quietly and without adding more pollution to the air. As Faiza Elmasry tells us, this is a pilot program and if it proves to be successful, the goat gardener program will be extended to other areas of New York. Faith Lapidus narrates.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.

    Special Report

    Adrift The Invisible African Diaspora