India’s stock markets have been powering ahead after the election win of Narendra Modi. James Crabtree explains to James Kynge the technical reasons why the rally may go on but how its sustainability depends on Modi delivering his promised structural reforms.
Jimmy Choos under your sari and an African safari for the Diwali long weekend?
A new report by Kotak Wealth Management and Ernst & Young – Top of the Pyramid 2014 – finds that India’s super rich are “ready for change” as a strong new government comes to power in New Delhi – and they’re spending to prove it.
By Saurabh Mukherjea of Ambit Capital
Of the eight elections that India has seen since 1984, seven have produced positive stock market returns during the following two years. Even more spectacularly, the average one-year and two-year post-election returns for the Sensex are 46 per cent and 27 per cent respectively. The two year return is a Compound Annual Growth Rate (CAGR) figure.
Since the Sensex’s 30-year CAGR (1984-2014) has been 16 per cent and since the two-year post-election CAGR is 27 per cent, simple arithmetic suggests that the two years following general elections have driven over 75 per cent of the Sensex’s returns in the last 30 years.
Shares in Infosys, the Indian IT bellwether, dropped sharply on Thursday morning after senior management tempered hopes for growth in the current fiscal year and warned that the company was facing several challenges.
The stock was down 8.4 per cent by 2 pm in Mumbai at Rs3,364.
Remember that note from Goldman Sachs? The one where the US investment bank upgraded its assessment of the Indian economy on hopes that Narendra Modi, the pro-business prime ministerial candidate for the opposition Bharatiya Janata Party (BJP), would lead India’s next government?
Then, New Delhi was up in arms and accused Goldman of interfering. Now, it seems Goldman was only saying what all investors were thinking. Indian markets closed at record highs on Thursday and again on Friday, after the Election Commission announced dates for the voting and opinion polls showed Modi gaining popular support.
The first official day of electioneering in India, after the Election Commission announced dates and details for the polls. The benchmark Sensex index hits an all-time high.
As the opposition Bharatiya Janata Party, with its pro-business stance, raced ahead in state elections last week and a slew of good economic data was released, India’s equity markets boomed and the benchmark Sensex index reached a new record high on Monday.
Is this different to previous peaks in the Sensex? Perhaps. A quick dig through the numbers shows that Indian equities are better value now than during previous highs.
India’s benchmark equity index is nearing its all-time high and the volatile rupee is the strongest it has been against the dollar in weeks. Part of the explanation lies in exit polls released this week which suggest that the opposition Bharatiya Janata Party (BJP) may do well when results for five state elections are announced on Sunday.
But how important are these results and what can we expect from the markets in the coming months?
It’s official. India believes a government led by Narendra Modi, the contentious prime ministerial candidate for the opposition Bharatiya Janata Party, would be a blessing for the economy. At least, so says Goldman Sachs.
In a note to clients on Tuesday, analysts at Goldman increased their target for the Nifty index at the end of 2014 to 6,900 points. The benchmark index is currently trading around 6,240 points.
Earlier this year, Goldman had a cautious view on India. But the Nifty has gained 30 per cent since the end of August and the bank has good reason to raise its investment outlook.
Sensex 2003-13, Source: BSE
The Sensex hit an all time high on Friday, reaching 21,293 and exceeding its previous high of 21,206 set during the stock market boom of 2008. Read James Crabtree’s story on FT.com here.
The Sensex, India’s benchmark index, has gained more than 5 per cent in the past month, approaching a three-year high.
The rally in equities is partly to do with the start of the earnings season on October 11. Corporate results for the quarter ended in September have been good so far – but is this optimism a bit early?
Investors have given a thumbs up to Fortis Healthcare, the Indian hospitals chain, after it announced plans on Monday to sell its private clinic network in Hong Kong to Bupa.
Shares in Fortis rallied 6.5 per cent on Tuesday morning before moderating to close up 0.7 per cent at Rs105.25.
In March, India’s benchmark Sensex index was promising to rise above 20,000 points. In May, the Nifty index breached its own high-water mark of 6,200 points. How the mighty have fallen.
By lunchtime in Mumbai on Friday, the Sensex was at a meager 18,765 while the Nifty hovered around 5,675. But how much further will Indian markets fall?
Have investors overreacted to the latest news of the end of the US Federal Reserve’s quantitative easing programme? One Indian brokerage, Ambit Capital, reckons they have. In a note on Thursday, it says the sell-off is a buying opportunity and expects returns on Indian equities to rise in tandem with yields on US Treasuries.