Analysts see further growth ahead

Mumbai: Investors in Indian shares should breathe easy this week after a much lower than expected drop in US jobless data meant there was hope for a recovery in the world's largest economy, and help bolster expectations for sustained foreign portfolio investments.

Foreigners have bought Indian shares worth $13.2 billion (Dh48.4 billion) since the beginning of January, spurred by the country's rapid economic growth and rising corporate earnings, and analysts are betting the inflow could match or better the record $17.5 billion that came in last year and had lifted the widely tracked Sensex in 2009 by 81 per cent, the most in 18 years.

Steeplechase

Gains in the benchmark index have been modest this year at around five per cent, mainly because it was the most expensive in Asia and among the BRIC markets. The Sensex trades at about 17.5 times estimated profit.

"It's going to be a steeplechase," said equity trader Rasesh Shah. "There will be hurdles to mount and ditches to cross, but the latest US data is a big morale booster."

All the three key US stock indices rose more than one per cent on Friday after Washington said payrolls fell for a third month in August, but the loss of 54,000 non-farm jobs was almost half that was expected by economists.

Shah said the data would erase worries of a double-dip recession in the US, and make fence-sitting fund managers to place their bets on Indian sectors that are doing well.

Car sales in India have been on cruise mode for many months as rising incomes boost consumer spending. Maruti Suzuki, the country's biggest carmaker, said August sales jumped 24 per cent to a record 104,791 units. Domestic demand surged 33 per cent while exports fell 18 per cent to 12,117 units, the company said.

Tata Motors said auto sales in the domestic market jumped 32 per cent in August to 65,938 units, while utility vehicle and tractor maker Mahindra and Mahindra reported a 29 per cent jump in August sales.

Automakers in the US posted their weakest August in 27 years, with sales dropping 21 per cent, while in China, the world's biggest auto market by volume, car sales jumped almost 60 per cent.

Sales in India are expected to pick up when most people get their annual bonuses ahead of Diwali in early November. Toyota Motor Corp, Volkswagen AG and Ford Motor Co are among car makers building plants and introducing new models in India, where the government expects industry vehicle sales to more than double to 3 million annually by 2015.

Tata Motors, which owns the UK-based luxury brands Jaguar and Land Rover, plans to sell the world's cheapest car — Nano — in Africa, Latin America and members of the Association of Southeast Asian Nations, Chairman Ratan Tata said.

Manufacturing

The company spends on average Rs30 billion (Dh2.3 billion) a year on new products and plants, he told shareholders at the annual general meeting.

India's manufacturing expanded at a slightly slower pace in August, a survey showed, but this was no indication of a slowdown. The HSBC and Markit Economics' purchasing managers' index fell to 57.2 from 57.6 in July. A reading above 50 shows expansion.

"India's economy shows no signs of cooling off. Output continues to expand at a brisk pace and new orders remain in solid expansionary territory, signaling further growth ahead," Frederic Neumann, co-head of Asian economic research at HSBC, said in a statement.

"But growth comes at a price: inflationary pressures, already a concern, continue to simmer, with input prices rising and output price pressures only easing marginally."

He expects the Reserve Bank of India to raise interest rates at its scheduled policy meeting on September 16, which would be its fifth increase since mid-March.

India's $1.3 trillion economy expanded at an annual rate of 8.8 per cent in the June quarter, the fastest pace in 2 1/2 years, the government said last week, indicating consumer demand remains strong.

The writer is a journalist based in India