India’s stock market will benefit from government reforms to attract capital and boost economic growth, said Ravi Narain, chief executive officer of the National Stock Exchange of India Ltd.
India’s equity market is “very much driven by government reforms and what the growth story is,” Narain said yesterday at a conference in New York.
The BSE India Sensitive Index, Sensex, has gained five per cent over the past month, extending its rally this year to 21 per cent, as Prime Minister Manmohan Singh opened the retail and aviation industries to foreign investors and cut fuel subsidies to reduce government’s deficit. Overseas investors have bought a net $14 billion in Indian equities as of September 21, after withdrawing $512 million last year, according to the nation’s market regulator.
Shares on the benchmark index traded at about 15 times estimated earnings, below the average of 16 over the past five years, according to data compiled by Bloomberg. This compares with an average multiple of 11 for emerging-market stocks.
The Bank of New York Mellon India ADR Index lost 0.1 percent to 1,039.14 in New York yesterday, falling for the first time in three days.
Indian stocks’ valuations are attractive because the shares in the benchmark are more diversified than their peers in developing countries, according to Kathryn Koch, a senior strategist at Goldman Sachs Asset Management.
‘No better investment’
“Longer term, I don’t think there’re any better investment opportunities out there than India,” Koch said at the conference.
India has the greatest growth potential among the so-called BRIC countries, which include Brazil, Russia, India and China, because it has the most favourable demographics and a young working population, she said.
India’s gross domestic product rose 5.5 per cent in the three months through June from a year earlier, rebounding from a three-year low of 5.3 per cent during the previous period. That compared with second-quarter growth rates of 0.49 per cent in Brazil, four per cent in Russia and 7.6 per cent in China.
The Sensex Index fell the most in three weeks on September 20 after Singh’s largest ally said it was exiting the coalition over the announced reforms. Trinamool Congress ministers will be pulled from the federal cabinet on September 21, party leader Mamata Banerjee said on September 18.