Mumbai - For the first time in five years, Nilesh Dedhia is buying Indian stocks.
The 48-year-old owner of a die-casting factory in Mumbai joins a growing number of local investors returning to the equity market on speculation that national elections in May will deliver a government with the mandate to revive economic growth from a decade low.
That optimism is spurring the longest stretch of unit trust inflows since 2009 and helping the Standard & Poor’s BSE Sensex sidestep the biggest equity losses worldwide in the three other Bric nations of Brazil, Russia and China this year.
India’s bulls are putting their faith in the opposition Bharatiya Janata Party (BJP) led by Narendra Modi, who has overseen annual economic expansion of 10 percent as the head of Gujarat state since 2001 and has pledged to boost investment if he takes power from Prime Minister Manmohan Singh’s Congress Party.
The Sensex rallied to a record this week on speculation the BJP is gaining momentum among voters, even as the MSCI Bric index extended this year’s drop to 9.6 percent.
“Investors are taking a view that the election outcome will be favourable and have begun to put money back into stocks, which is a good sign,” Sam Mahtani, a director of emerging markets at F&C Asset Management, said last week.
India was the firm’s biggest overweight position in emerging markets, he said.
Investors are buying in India even as they unload shares in Brazil, Russia and China.
Brazil’s Ibovespa has lost 11 percent so far this year as commodity exporters such as Vale have sunk. Russia’s Micex index has led declines among world equity indices tracked by Bloomberg this year, retreating 13 percent after President Vladimir Putin’s move to wrest control of Ukraine’s Crimea region sparked the worst crisis between the Kremlin and the West this century.
Hong Kong’s Hang Seng China Enterprises index has tumbled 13.4 percent this year as falling exports and slower manufacturing growth fuel concern that the biggest developing economy is weakening.
India’s Sensex has risen 3.2 percent this year, sending its valuation to 14 times estimated earnings for the next 12 months, Bloomberg data show.
That is a 71 percent premium over the MSCI Bric index, versus an average gap of 54 percent during the past three years. The Sensex was little changed in Mumbai yesterday.
Larsen & Toubro, India’s largest engineering company, and Oil & Natural Gas, the biggest energy explorer, have led gains this year with rallies of more than 10 percent.
Surveys by CVoter, Nielsen and the Centre for the Study of Developing Societies (CSDS) have predicted the BJP will win the most seats in parliamentary elections.
Congress is projected to deliver its lowest-ever tally, as voters in the world’s largest democracy punish the party for the economic slump, graft scandals and the highest inflation among 17 Asian nations tracked by Bloomberg.
The BJP and its allies will win as many as 232 parliament seats, 40 short of a majority, according to a poll released last week by the CSDS. Election results are due on May 16.
Proponents see Modi as a leader who can revive growth by scaling back subsidies and attracting investment, while opponents blame him for riots in 2002 that killed about 1 000 people, mostly Muslims.
Indian investors still had room to boost stock holdings, which made up less than 6 percent of their assets, Axis Capital chief executive Nilesh Shah said. That compares with 8.5 percent in Japan and 33 percent in the US. – Bloomberg