Aberdeen cuts India exposure
Country’s gauge is the only one down this year in the Bric group after rallies in Brazil, Russia and China
India’s stock market is swooning after a surge sparked by optimism over Prime Minister Narendra Modi’s development agenda stretched valuations.
Aberdeen Asset Management Plc is among those reducing holdings in Asia’s third-largest economy in favour of cheaper regional markets, contributing to a 3 per cent drop in the S&P BSE Sensex index this year after a 30 per cent jump in 2014.
India’s gauge is the only one down this year in the Bric group after rallies in Brazil, Russia and China. The Sensex’s valuation of 15 times projected 12-month earnings is about 20 per cent higher than the MSCI Emerging Markets index. That leaves companies such as Hindustan Unilever Ltd and Cipla Ltd with little room to undershoot profit growth expectations.
“The issue with India is the price,” said Hugh Young, a managing director in Singapore for Aberdeen, which oversees about $537 billion. “India is still not cheap to other Asian markets. We have taken 2 per cent out of India in total.”
A tax spat between foreign investors and the Indian government over past capital gains has also soured sentiment, embroiling Aberdeen and others in litigation.
Meanwhile, funds are flowing to the Brazilian, Chinese and Russian markets, among the world’s best performers in 2015. China’s Shanghai Stock Exchange Composite index has jumped 29 per cent, Russia’s Micex Index is up 23 per cent and the Ibovespa Brasil Sao Paulo Stock Exchange index has climbed about 14 per cent.
Modi’s Agenda
Modi’s steps since sweeping to office a year ago include a push to revive investment and manufacturing while curbing graft. The economy expanded 7.5 per cent in October through December from a year ago, though revisions are clouding the data.
About $392 billion of infrastructure projects — more than the size of Thailand’s economy — were stalled as of early March, government data show. That’s tempering the initial euphoria about his economic-reform agenda.