Indian markets hit by record low 'buys'
Thursday, 28 January 2010
LONDON/SINGAPORE, Jan 27 (Bloomberg): Investment strategists are cutting recommendations on India at a record pace, after the country's stocks surpassed China as the most expensive major emerging market for the first time since 2006.
The Bombay Stock Exchange's (BSE) Sensex is valued at 20 times estimated profits, higher than China for the first time since November 2006 and the second-most expensive among the 25 biggest markets after Japan, according to monthly data.
Even after the Sensex sank 4 per cent last week, the most in almost three months, its stocks trade within 6.1 per cent of analysts' average 12-month price estimates.
Rising valuations prompted analysts to cut 'buy' ratings on Indian equities to a record low. Goldman Sachs Group said the Reserve Bank of India (RBI) plans its first interest rate increase since 2006 this week to curb inflation . The last eight times wholesale price increases climbed above their long-term average, the Sensex posted average losses of 5.6 per cent, data show.
"There are better opportunities in other emerging markets," said Roger Groebli, the Singapore-based head of financial market analysis at LGT Capital Management, part of a group that oversees about $84 billion. India "will be an underperformer for the first quarter," he said.
The Sensex gauge fell 0.9 per cent to 16,715.34 in morning trade in Mumbai. The gauge surged 117 per cent from its March low to a high on January 6 as growth in the fourth-largest emerging economy after China, Brazil and Russia accelerated.
Gross domestic product grew 7.9 per cent in the three months through September, from 5.8 per cent at the beginning of 2009.
India may expand 6.4 per cent in 2010, according to the Washington-based International Monetary Fund. The rally pushed the Sensex's valuation above China's Shanghai Composite Index, which trades for 18 times analysts' earnings estimates.
Chinese valuations are falling as faster growth adds pressure on policy makers to slow the rise in asset prices. The government reported last week that the economy expanded 10.7 per cent in the fourth quarter, the fastest pace since 2007.
Brazil's Bovespa trades at 13 times earnings estimates and Russia's Micex is valued at 9.2 times. Japan's Nikkei-225 Stock Average has a ratio of 40, compared with 14 for the Standard & Poor's 500 Index, Bloomberg data show.
Tata Motors, maker of the world's cheapest car, led the Sensex's advance since March with a 470 per cent gain. The Mumbai-based company is valued at 27 times analysts' earnings estimates, compared with 23 times for Shanghai-based SAIC Motor Corp, China's largest carmaker.
Surging equity valuations prompted India stock analysts to drop their "buy" ratings to 49% of total recommendations , the lowest level since Bloomberg began tracking the data in 1997 and down from 59 per cent a year ago.
The rise in price-to-earnings ratios may prompt companies to sell shares in stock offerings. Indian firms have plans to raise as much as $30 billion while the government may sell about $10 billion of shares in state-controlled companies, according to Kotak Securities.
The Bombay Stock Exchange's (BSE) Sensex is valued at 20 times estimated profits, higher than China for the first time since November 2006 and the second-most expensive among the 25 biggest markets after Japan, according to monthly data.
Even after the Sensex sank 4 per cent last week, the most in almost three months, its stocks trade within 6.1 per cent of analysts' average 12-month price estimates.
Rising valuations prompted analysts to cut 'buy' ratings on Indian equities to a record low. Goldman Sachs Group said the Reserve Bank of India (RBI) plans its first interest rate increase since 2006 this week to curb inflation . The last eight times wholesale price increases climbed above their long-term average, the Sensex posted average losses of 5.6 per cent, data show.
"There are better opportunities in other emerging markets," said Roger Groebli, the Singapore-based head of financial market analysis at LGT Capital Management, part of a group that oversees about $84 billion. India "will be an underperformer for the first quarter," he said.
The Sensex gauge fell 0.9 per cent to 16,715.34 in morning trade in Mumbai. The gauge surged 117 per cent from its March low to a high on January 6 as growth in the fourth-largest emerging economy after China, Brazil and Russia accelerated.
Gross domestic product grew 7.9 per cent in the three months through September, from 5.8 per cent at the beginning of 2009.
India may expand 6.4 per cent in 2010, according to the Washington-based International Monetary Fund. The rally pushed the Sensex's valuation above China's Shanghai Composite Index, which trades for 18 times analysts' earnings estimates.
Chinese valuations are falling as faster growth adds pressure on policy makers to slow the rise in asset prices. The government reported last week that the economy expanded 10.7 per cent in the fourth quarter, the fastest pace since 2007.
Brazil's Bovespa trades at 13 times earnings estimates and Russia's Micex is valued at 9.2 times. Japan's Nikkei-225 Stock Average has a ratio of 40, compared with 14 for the Standard & Poor's 500 Index, Bloomberg data show.
Tata Motors, maker of the world's cheapest car, led the Sensex's advance since March with a 470 per cent gain. The Mumbai-based company is valued at 27 times analysts' earnings estimates, compared with 23 times for Shanghai-based SAIC Motor Corp, China's largest carmaker.
Surging equity valuations prompted India stock analysts to drop their "buy" ratings to 49% of total recommendations , the lowest level since Bloomberg began tracking the data in 1997 and down from 59 per cent a year ago.
The rise in price-to-earnings ratios may prompt companies to sell shares in stock offerings. Indian firms have plans to raise as much as $30 billion while the government may sell about $10 billion of shares in state-controlled companies, according to Kotak Securities.