Indian Election 'Very Bullish' for Rupee, Stocks, Reliance Says
May 18 (Bloomberg) -- India's currency may gain as much as 15 percent against the dollar by the end of next year and stocks will rally after election tallies ensured a stable government, according to Reliance Capital Asset Management Ltd.
"The election result is extremely positive and very, very bullish," said Madhusudan Kela, head of equities at Mumbai- based Reliance Capital Asset Management, the nation's largest money manager overseeing $18 billion of assets. "This will provide a government which is stable and has powers to take decisions."
Prime Minister Manmohan Singh's Congress party and its allies won 260 of the 543 seats in the lower house of India's parliament, the Election Commission said on its Web site on May 16, exceeding the most optimistic prediction for 216 in exit polls released by NDTV television channel after the five-week elections ended on May 13.
The Bombay Stock Exchange Sensitive Index climbed 26 percent this year, trailing measures in Brazil, Russia and China, on concern the election wouldn't produce an outright winner. The Indian rupee dropped 1.2 percent against the dollar, compared with a 9.4 percent advance for the Brazilian real.
The nation's benchmark stock index may surge as much as 20 percent over the next week as overseas investors purchase as much as $3 billion of Indian shares within a month, said Singapore-based Samir Arora, who oversees Helios Capital Management Pte, an India focused hedge fund.
Equity Purchases
Kela predicts the stock market may draw overseas investments worth $10 billion this year as stimulus measures around the world increase trading. Purchases of Indian equities by overseas investors last month exceeded sales by the most since October 2007 on waning risk aversion and on optimism India's $85 billion stimulus plan will revive economic growth.
Domestic-driven industries such as banking and autos will perform well, Kela said, without naming any companies.
Shares in ICICI Bank Ltd., India's second-largest, gained 28 percent this year, while Tata Motors Co., the nation's biggest maker of trucks, advanced 66 percent.
The Sensitive Index won't fall to its March lows, and probably will find a new base at between 10,000 and 11,000, Kela said. The Sensex rose 2.5 percent on May 15 to 12,173.42.
"Bull markets are back, unless we see complete chaos in global markets," Kela said. "India will outperform over the next one to three years."
The rupee may appreciate 10 to 15 percent against the dollar over the next 12 to 18 months, Kela said. That's more bullish than the median of 28 analysts in a Bloomberg survey for the rupee to end next year at 47 per dollar. The currency closed May 15 at 49.395 per dollar.
The outlook for Indian bonds is less sanguine, according to Bekxy Kuriakose, who manages the equivalent of $1 billion in Indian debt at DBS Cholamandalam AMC Ltd. in Mumbai.
Bond Yields
Benchmark 10-year bond yields have increased 1.17 percentage points this year even as the Reserve Bank of India slashed its key policy interest rates three times, pumped cash into the banking system and purchased debt from the market to cap yields.
"For the bond market, the concern is the borrowing plan and the fiscal situation," Kuriakose said. "There won't be a runaway slide in bond yields."
Asia's third-biggest economy expanded 5.3 percent in the quarter through Dec. 31, the slowest pace since 2003, while factory output in March shrank the most in 16 years.
India will outperform other emerging markets as long as the government adopts a pro-growth, pro-reform stance, said Rahul Chadha, Hong Kong-based head of Indian equities at Mirae Asset Global Investment, with $46 billion in global equities.
"We needed a stable government especially in the context of the global environment, which is still challenging," Chadha said. "We need the government to kick-start the economy."
To contact the reporters on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net
May 18 (Bloomberg) -- India's currency may gain as much as 15 percent against the dollar by the end of next year and stocks will rally after election tallies ensured a stable government, according to Reliance Capital Asset Management Ltd.
"The election result is extremely positive and very, very bullish," said Madhusudan Kela, head of equities at Mumbai- based Reliance Capital Asset Management, the nation's largest money manager overseeing $18 billion of assets. "This will provide a government which is stable and has powers to take decisions."
Prime Minister Manmohan Singh's Congress party and its allies won 260 of the 543 seats in the lower house of India's parliament, the Election Commission said on its Web site on May 16, exceeding the most optimistic prediction for 216 in exit polls released by NDTV television channel after the five-week elections ended on May 13.
The Bombay Stock Exchange Sensitive Index climbed 26 percent this year, trailing measures in Brazil, Russia and China, on concern the election wouldn't produce an outright winner. The Indian rupee dropped 1.2 percent against the dollar, compared with a 9.4 percent advance for the Brazilian real.
The nation's benchmark stock index may surge as much as 20 percent over the next week as overseas investors purchase as much as $3 billion of Indian shares within a month, said Singapore-based Samir Arora, who oversees Helios Capital Management Pte, an India focused hedge fund.
Equity Purchases
Kela predicts the stock market may draw overseas investments worth $10 billion this year as stimulus measures around the world increase trading. Purchases of Indian equities by overseas investors last month exceeded sales by the most since October 2007 on waning risk aversion and on optimism India's $85 billion stimulus plan will revive economic growth.
Domestic-driven industries such as banking and autos will perform well, Kela said, without naming any companies.
Shares in ICICI Bank Ltd., India's second-largest, gained 28 percent this year, while Tata Motors Co., the nation's biggest maker of trucks, advanced 66 percent.
The Sensitive Index won't fall to its March lows, and probably will find a new base at between 10,000 and 11,000, Kela said. The Sensex rose 2.5 percent on May 15 to 12,173.42.
"Bull markets are back, unless we see complete chaos in global markets," Kela said. "India will outperform over the next one to three years."
The rupee may appreciate 10 to 15 percent against the dollar over the next 12 to 18 months, Kela said. That's more bullish than the median of 28 analysts in a Bloomberg survey for the rupee to end next year at 47 per dollar. The currency closed May 15 at 49.395 per dollar.
The outlook for Indian bonds is less sanguine, according to Bekxy Kuriakose, who manages the equivalent of $1 billion in Indian debt at DBS Cholamandalam AMC Ltd. in Mumbai.
Bond Yields
Benchmark 10-year bond yields have increased 1.17 percentage points this year even as the Reserve Bank of India slashed its key policy interest rates three times, pumped cash into the banking system and purchased debt from the market to cap yields.
"For the bond market, the concern is the borrowing plan and the fiscal situation," Kuriakose said. "There won't be a runaway slide in bond yields."
Asia's third-biggest economy expanded 5.3 percent in the quarter through Dec. 31, the slowest pace since 2003, while factory output in March shrank the most in 16 years.
India will outperform other emerging markets as long as the government adopts a pro-growth, pro-reform stance, said Rahul Chadha, Hong Kong-based head of Indian equities at Mirae Asset Global Investment, with $46 billion in global equities.
"We needed a stable government especially in the context of the global environment, which is still challenging," Chadha said. "We need the government to kick-start the economy."
To contact the reporters on this story: Pooja Thakur in Mumbai at pthakur@bloomberg.net Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net
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