Indian stocks, laggards among the world’s biggest emerging market economies in the first quarter, recovered to post the steepest returns the past month as investors snapped up the cheapest shares in 13 years.
Shares traded at 9.2 times profit, the cheapest since at least 1996, after the Sensex plunged 45% since September, the worst slide among the so-called Bric (Brazil, Russia, India, China) nations, according to data compiled by Bloomberg and UBS.
The Bombay Stock Exchange sensitive index, Sensex, has climbed 34% since falling to its lowest level in more than three years on 9 March. The advance beat increases among equity benchmark indexes for Brazil, Russia and China, the biggest developing economies.
The Indian equity index climbed 0.6% during the first quarter, while China’s Shanghai Composite index added 30%, Russia’s Micex rose 25% and Brazil’s Bovespa increased 9%.
“The Sensex’s latest rally may fizzle as investors sell shares ahead of general election in the world’s largest democracy, scheduled for 16 April to 13 May,” according to Michael Konstantinov of RCM, a division of Allianz Global Investors.
“The elections put a lot of uncertainty on government efforts to combat the economic slowdown,” said Konstantinov. “We’ll wait for the outcome before we put more money there.”
Zurich-based UBS AG, Switzerland’s largest bank, forecasts the Sensex will gain 23% in the next 12 months as lower interest rates spur demand for credit from ICICI Bank Ltd and cars made by MarutiSuzuki India Ltd.
BlackRock Inc., the biggest publicly traded US money manager, predicts India’s market may get a boost from domestic mutual funds that it estimates are holding as much as 20% of their assets in cash.
Shares of New Delhi-based Maruti Suzuki, India’s biggest car maker, will rally on revived demand for diesel-powered autos, and Mumbai-based ICICI Bank, India’s second largest lender, may advance as the economy bottoms in the next six months, Suresh Mahadevan, UBS head of India Research, wrote in a 26 March note. He added both stocks to UBS model portfolio for India.
India’s gross domestic product, the fourth largest among developing nations, may grow at a 5.1% pace this year, down from 7.3% last year, according to the International Monetary Fund (IMF). The estimated growth is the second fastest after China among major economies tracked by the Washington-based IMF.
The Sensex began falling from a record in January 2008.
Pimm Fox and Eric Martin in New York, Pooja Thakur in Mumbai, Liza Lin and Haslinda Amin in Singapore and Kartik Goyal in New Delhi contributed to this story.