Friday, February 09, 2007

Indian Stocks Pace Gains On GDP Forecast Of 9.2 Pct.; Analysts Cautious On Outlook

Jacob Cherian - All Headline News Staff Writer

Shares of U.S.-listed Indian companies paced gains on Wall Street Wednesday after the Bombay Stock Exchange's Sensex rallied 165 points for a record close of 14,643.

The heightened optimism came after the government reported that the economy will grow by 9.2 percent in the current fiscal year.

The Bank of New York India ADR index closed up 25.51 points at 1,180.73, Wednesday.

Despite concern over rising inflation and interest rates, sufficient fund flows have managed to keep the Sensex afloat.

Investors acted on better-than-expected GDP growth estimate of 9.2 percent, above last year's actual growth rate of 9 percent.

A number of investor-company meetings are being organized by brokerage houses like Morgan Stanley, which is currently hosting a conference in Mumbai. Others have just ended or are in the pipeline.

One institutional dealer at a local brokerage said, "There's huge investor interest about these conferences. Other than existing fund managers, a lot of new funds are also showing interest to invest in India."

According to data from the Securities and Exchange Board of India, foreign institutional investors have invested almost $263 million into the Indian market this month.

However, market veterans remained cautious as rising interest rates, crude prices and inflation could offset the gains in the short run.

But as one dealer at a Mumbai brokerage said, bad news is discounted quickly and that seems to be the case this time around as well.

"They'll manage to hit 9.2 percent this year, partly because the government is doing a number of things to make sure it happens," said Cameron Brandt, global markets analyst at Emerging Portfolio Fund Research.

"The growth is not sustainable and that's certainly the consensus among most of the fund managers that we speak to," Brandt said. "One thing that's worrying some fund managers is almost the degree of euphoria in India among the government and the business class that they're starting to believe their own predictions."

Another analyst at Citigroup, Rohini Malkani was quoted by MarketWatch as saying, "While acknowledging overheating issues and risks related to infrastructure, the human resource paradox, inclusive growth and politics, we believe the odds favor India sustaining growth."

"At the moment, it's largely a domestic story in all senses of the word," Brandt said. "Foreign fund managers are not committing large sums of money to this story at the moment. While investors are parking money in India country funds, they're doing so at a very moderate pace."

Wednesday's rally led to BSE's market capitalization of close to $900 billion.

Source : http://www.allheadlinenews.com/articles/7006406447

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