Indian Stocks Could Gain up to 15% Before Dec, says Jim O’Neill
Indian stocks are on the cusp of a bull run and could gain 10-15% before December, said Jim O’Neill, former chairman of Goldman Sachs Asset Management. In an exclusive interview with ET after the election results on Friday, he said that investors would revise economic forecasts if the new government implements reforms, especially in retail and banking sectors, and opens up the economy.
“They are already talking about 6.57% growth in FY16, if the government follows investment reforms. At the end of FY16, people may look forward to 7-8% growth,” said O’Neill over phone from Las Vegas. India, which is able to form a majority government in 30 years, is a positive by itself, he said. Moreover, International investors are excited about a business-friendly government at the Centre.
Since January, foreig n institutional investors (FIIs) have invested Rs 41,221 crore in Indian equities in anticipation of a pro-reform and progrowth government at the Centre.
“The risk premium (for Indian equities) will start to decline as investors will look forward to higher earnings growth,” he said.
O’Neill expects strong reforms to take place such as a more sophisticated macroeconomic policy framework, introduction of stable policy framework on foreign direct investment, freeing up Indian economy to greater investments. He will expect some resistance and opposition while implementing policy reforms
“The government should aim to stabilise inflation. I expect the Reserve Bank of India (RBI) to reduce interest rates if the rupee rises further,” said O’Neill.