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IN - India Proves Last BRIC Standing as Modi Revives Faith in Stocks

Lesedauer: min

For the first time in five years, Nilesh Dedhia is buying Indian stocks. The 48-year-old owner of a die-casting factory in Mumbai is among a growing number of local investors returning to the $1.2 trillion equity market on speculation national elections in May will deliver a government with the mandate to revive economic growth from a decade low. That optimism is spurring the longest stretch of mutual-fund inflows since 2009 and helping the S&P BSE Sensex sidestep the biggest equity losses worldwide in the three other BRIC nations of Brazil, Russia and China this year.

India’s bulls are putting their faith in the opposition Bharatiya Janata Party led by Narendra Modi, who oversaw annual economic expansion of 10 percent as the head of Gujarat state since 2001 and has pledged to boost investment if he takes power from Prime Minister Manmohan Singh’s Congress Party. The Sensex rallied to a record this week on speculation the BJP is gaining momentum among voters, even as the MSCI BRIC Index extended this year’s drop to 8.6 percent.

“Investors are taking a view that the election outcome will be favorable and have begun to put money back into stocks, which is a good sign,” Sam Mahtani, a London-based director of emerging markets at F&C Asset Management Plc, which oversees about $150 billion, said by phone on March 7. India is the firm’s biggest overweight position in emerging markets, he said.

Fund Inflows
India’s local equity funds attracted 30.5 billion rupees ($500 million) in the four months ended February, recording net additions each month for the longest stretch of inflows since February 2009. Investors withdrew 243.5 billion rupees over the previous 24 months, according to data from the Association of Mutual Funds in India.

Overseas investors added $634.4 million to the local stock market this year, the most among Asian markets tracked by Bloomberg after Indonesia. They bought $20 billion of shares in 2013. U.S.-listed exchange-traded funds that invest in India have recorded a net $144 million of outflows this year.

Investors are buying in India even as they unload shares in Brazil, Russia and China.
Brazil’s Ibovespa has lost 11 percent as commodity exporters such as Vale SA sank. Russia’s Micex Index has led declines among world equity indexes tracked by Bloomberg this year, retreating 13 percent after President Vladimir Putin’s move to wrest control of Ukraine’s Crimea region sparked the worst crisis between the Kremlin and the West this century.

Election Outlook
The Hang Seng China Enterprises Index has tumbled 12 percent this year as falling exports and slower manufacturing growth fuel concern that the biggest developing economy is weakening.

Meanwhile, India’s Sensex has increased 3.1 percent this year, sending its valuation to 14 times estimated earnings for the next 12 months, according to data compiled by Bloomberg. That’s a 71 percent premium over the MSCI BRIC index, versus an average gap of 54 percent during the past three years.

Larsen & Toubro Ltd., India’s largest engineering company, and Oil & Natural Gas Corp., the biggest energy explorer, have led gains in the Sensex this year with rallies of more than 11 percent.

Surveys by CVoter, Nielsen and the Centre for the Study of Developing Societies predicted the BJP will win the most seats in parliamentary elections. Congress is projected to deliver its lowest-ever tally, as voters in the world’s largest democracy punish the party for the economic slump, graft scandals and the highest inflation among 17 Asian nations tracked by Bloomberg.

Poll Accuracy
The BJP and its allies will win as many as 232 parliament seats, 40 short of a majority, according to a poll released on March 6 by the CSDS. Results are due on May 16.

Proponents see Modi as a leader who can revive growth by scaling back subsidies and attracting investment, while opponents blame him for 2002 riots that killed about 1,000 people, mostly Muslims.


Source: Sfgate.com

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