In­dian Stocks Could Gain up to 15% Be­fore Dec, says Jim O’Neill

The Economic Times - - Personal Finance - BISWA­JIT BARUAH

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.

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