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Home / Market / Stock-market-news /  Sensex holds at 13-month high as GDP stokes valuation concern

Mumbai: Indian equities fluctuated after the gauge climbed to a 13-month high as a slowdown in the nation’s economic growth rekindled concerns on valuations.

Declines in metal producers and resources companies countered advances in makers of consumer goods, financial-services companies and utilities. The S&P BSE Sensex and the NSE Nifty 50 Index closed little changed after changing direction at least 20 times.

Indian equities have climbed 24% from their February lows as a wave of global policy easing and the forecast of above-normal rain after a two-year drought lured foreign flows. Concerns about equity valuations that are near the highest in 16 months resurfaced after official data Monday evening showed the economy expanded at the slowest pace in more than a year.

“The market is looking fairly stretched at the index and could take a breather," Vijay Chopra, managing director of New Delhi-based Enoch Ventures Pvt., said by phone. “The government should do some soul-searching and fast-track reforms to boost growth."

Gross domestic product expanded 7.1% in April-June from a year earlier, weaker than the 7.6% median estimate in a Bloomberg survey of 36 economists. India still retains its spot as the world’s fastest-growing big economy, and the outlook has brightened after Prime Minister Narendra Modi in August broke a parliamentary logjam and paved the way for a landmark national sales tax.

Consumption is forecast to increase after a pay hike for federal employees and a revival in the July-September monsoon rains that are key to rural incomes.

“The 7.1% number is still an enviable number if you look at it from a global macro perspective," Chopra said. He is advising investors to buy shares of chemical makers, paint companies and private lenders.

The Sensex is up 8.8% this year and is valued at 16.3 times projected 12-month earnings, near the highest level since April 2015. The MSCI Emerging Markets Index is valued at a multiple of 12.4, data compiled by Bloomberg show.

Foreigners have bought $5.9 billion into local stocks since 1 January, surpassing last year’s $3.3 billion. Bloomberg

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