In much of 2013, India was considered the apotheosis of emerging market woes.
But the tide turned a few months ago on the Modi sentiment — the belief that Narendra Modi would come to power with stable government, and that he would push through much-needed reforms that would help revive Indian economic growth.
India’s Sensex index is up a whopping 13.9% since the beginning of the year.
Jim O’Neill, former chairman of Goldman Sachs Asset Management, tells the Economic Times that the rally is far from over and that Indian stocks could rise another 10-15% this year.
Here’s an excerpt:
We have seen Indian markets going up for the last eight months. Do you think India’s on the verge of a new bull run?
Yes, I think India is on the cusp of a new bull market. I think the risk premium for India will start to decline, and people will begin to factor in the possibility of higher earnings.
Are Indian market valuations stretched after the sharp rally?
Obviously, there would be a limit to how much the markets can rally. I think if people make revision of earnings growth forecast, then the implied price-to-earnings (PE) multiple will be less than what people are currently thinking. I reckon there’s a very good chance of the Indian markets rallying another 10-15% this year.
The BJP’s return to power has made investors bullish on investment-related sectors. What’s your view?
I agree investment is important because the new government will need it for structural growth. India has the potential to grow at 10% because of its demographics, and I think this is the right time to be bullish about the possibilities. The sectors that might benefit from investment reforms would be banking, insurance, and agriculture, though I would be bullish in gene ..
O’Neill said he’d like to see a “government is less involved with people’s daily lives,” lower deficit, more stable inflation and moves to boost foreign direct investment (FDI).
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