BackIndia stocks prices stretched amid Modi euphoria: Aberdeen
Thirteen of 28 companies on the Indian gauge that have posted earnings for the three months ended June have beaten or matched forecasts
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Mumbai: The world-beating 23% rally in Indian equities this year may have exceeded the outlook for corporate earnings, according to Aberdeen Asset Management Plc.
We are in the more skeptical camp, Hugh Young, a Singapore-based managing director at Aberdeen, which oversees about $537 billion, said in an interview on Bloomberg TV India on Thursday. Things are too optimistic at the moment and prices are slightly ahead of fundamentals.
Global investors have bought $25.5 billion of domestic shares and bonds this year even as Prime Minister Narendra Modi has yet to deliver on his election pledges to revive economic growth and make India an easier place to do business after a landslide victory in May. Opposition lawmakers scuppered Modi’s attempt to revive a bill raising foreign ownership in insurance companies, dealing a blow to his efforts to further open Asia’s third-largest economy.
There are a few queries about the new government, about whether it’s active enough in the early days, Young said. A lot of people are expecting great things but it’s never easy in any country to have a major change quickly.
The S&P BSE Sensex, the best performer among the world’s 10 biggest markets this year, trades at 15.3 projected 12-month profits, compared with the MSCI Emerging Markets Index’s multiple of 11, data compiled by Bloomberg show. Thirteen of 28 companies on the Indian gauge that have posted earnings for the three months ended June have beaten or matched forecasts. That compares with 60% in the previous three months.
Earnings till the end of June are relatively lackluster as the economy was sluggish during this period, said Young. The market needs to pause for earnings to catch up. There is money waiting to come in. The problem is that of price.
The government estimates economic expansion will quicken to 5.9% in the year through March 2015 from 4.7% in the previous period, according to the finance ministry. The $1.88 trillion economy expanded 4.5% in 2012-2013, the slowest pace in a decade. BLOOMBERG
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