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

Video VOA EXCLUSIVE: Iraq President Vows to Fight IS 'Until They Are Killed or We Die'

In wide-ranging interview with VOA Persian service reporter, Fuad Masum describes conflict as new type of fight that will take time to win More

Video Russian Anti-Corruption Campaigner Slams Putin’s Crackdown on Dissent

In interview with VOA Alexei Navalny says he believes new law against 'undesirable NGOs' part of move to keep Russian president in power More

Video On The Scene: In Ethiopia, 'Are You a Journalist?' Is a Loaded Question

VOA's Anita Powell describes the difficulties faced by reporters in fully conveying the story in a country where people are reticent to share their true opinions 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.
Expelled from Pakistan, Afghan Refugees Return to Increased Hardshipi
X
Ayesha Tanzeem
May 28, 2015 6:48 PM
Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Expelled from Pakistan, Afghan Refugees Return to Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video Floodwaters Recede in Houston, but Rain Continues

Many parts of Texas are recovering from one of the worst natural disasters to hit the southwestern state. Heavy rains on Monday and early Tuesday caused rivers to swell in eastern and central Texas, washing away homes and killing at least 13 people. As VOA’s Greg Flakus reports from Houston, floodwaters are receding slowly in the country's fourth-largest city, and there likely is to be more rain in the coming days.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video US Voters Seek Answers From Presidential Candidates on IS Gains

The growth of the Islamic State militant group in Iraq and Syria comes as the 2016 U.S. presidential campaign kicks off in the Midwest state of Iowa.   As VOA’s Kane Farabaugh reports, voters want to know how the candidates would handle recent militant gains in the Middle East.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Film Festival Looks at Indigenous Peoples, Culture Conflict

A recent Los Angeles film festival highlighted the plight of people caught between two cultures. Mike O'Sullivan has more on the the Garifuna International Film Festival, a Los Angeles forum created by a woman from Central America who wants the world to know more about her culture.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.
Video

Video Iowa Family's Sacrifice Shaped US Military Service for Generations

Few places in America have experienced war like Waterloo. This small town in the Midwest state of Iowa became famous during World War II not for what it accomplished, but what it lost. As VOA’s Kane Farabaugh reports, the legacy of one family’s sacrifice is still a reminder today of the real cost of war for all families on the homefront.

VOA Blogs