http://www.dailytimes.com.pk/default.asp?page=2011\03\28\story_28-3-2011_pg14_2
Monday, March 28, 2011
Bulls turn bears on India as doubts grow
NEW DELHI: Investors have turned bearish on India despite government forecasts of nine percent economic growth, as concerns over widespread corruption and high inflation knock confidence, analysts say.
Only a few months ago investors were pouring into Indian equities, seeing the country as a promising high-growth market and talking about the “India story”. But now the mood looks to be on the turn. The government’s lack of progress on economic reform, massive corruption scandals including the cut-price sale of telecoms licences, and eight interest rate hikes to try to tame high inflation have all had an impact.
Citigroup economist Rohini Malkani said she had met some 50 investors in Singapore and Hong Kong this month and about 70 percent were “bearish on India”.
Fears about reduced investment in infrastructure, high inflation and the fallout from political scandals topped the list of investor worries, she said. The Bombay Stock Exchange Sensitive Index or Sensex has dropped more than eight percent this year, making it Asia’s worst large market performer — after it climbed 17 percent last year on the back of $29 billion poured in by foreign investors. Foreign institutional investors sold $2 billion worth of shares in January and February.
“Concerns about stubbornly high inflation pushing up interest rates, a high current deficit fuelled by higher oil prices, and corporate and government corruption scandals have all contributed to the selling,” said Deepak Lalwani, head of London-based, India-focused investment consultancy Lalcap. Market analysts expect that for the first half of 2011 at least, shares will continue to slide as the challenge of maintaining growth while cutting inflation, now at 8.3 percent, proves increasingly tough.
India’s central bank, the most aggressive in Asia in tightening monetary policy, lifted its benchmark borrowing rate to 6.75 percent this month — its highest level in three years. While the government projects nine percent expansion for the next fiscal year starting April 1, most economists’ forecasts are lower amid expectations the bank will raise rates further by as much 100 basis points, slowing investment and growth.
Monday, March 28, 2011
Bulls turn bears on India as doubts grow
NEW DELHI: Investors have turned bearish on India despite government forecasts of nine percent economic growth, as concerns over widespread corruption and high inflation knock confidence, analysts say.
Only a few months ago investors were pouring into Indian equities, seeing the country as a promising high-growth market and talking about the “India story”. But now the mood looks to be on the turn. The government’s lack of progress on economic reform, massive corruption scandals including the cut-price sale of telecoms licences, and eight interest rate hikes to try to tame high inflation have all had an impact.
Citigroup economist Rohini Malkani said she had met some 50 investors in Singapore and Hong Kong this month and about 70 percent were “bearish on India”.
Fears about reduced investment in infrastructure, high inflation and the fallout from political scandals topped the list of investor worries, she said. The Bombay Stock Exchange Sensitive Index or Sensex has dropped more than eight percent this year, making it Asia’s worst large market performer — after it climbed 17 percent last year on the back of $29 billion poured in by foreign investors. Foreign institutional investors sold $2 billion worth of shares in January and February.
“Concerns about stubbornly high inflation pushing up interest rates, a high current deficit fuelled by higher oil prices, and corporate and government corruption scandals have all contributed to the selling,” said Deepak Lalwani, head of London-based, India-focused investment consultancy Lalcap. Market analysts expect that for the first half of 2011 at least, shares will continue to slide as the challenge of maintaining growth while cutting inflation, now at 8.3 percent, proves increasingly tough.
India’s central bank, the most aggressive in Asia in tightening monetary policy, lifted its benchmark borrowing rate to 6.75 percent this month — its highest level in three years. While the government projects nine percent expansion for the next fiscal year starting April 1, most economists’ forecasts are lower amid expectations the bank will raise rates further by as much 100 basis points, slowing investment and growth.
