Gains in India shares prompt warning of overheating

Mumbai: Gains in Indian stock prices have exceeded the outlook for earnings growth, prompting Bajaj Allianz Life Insurance Co. to increase the amount of cash in their funds, said Chief Investment Officer Sashi Krishnan.

"We believe valuations are expensive," Pune-based Krishnan, who oversees $900 million (Dh3.3 billion) in assets, said while attending an investor conference in Mumbai yesterday. "We are not in a hurry to deploy our cash."

India's Bombay Stock Exchange Sensitive Index, or Sensex, rose 484.54, or 2.4 per cent, to 20,687.88, the highest since January 14, 2008, at close in Mumbai.

The benchmark has gained 28 per cent from the May 25 low, approaching the record closing high of 20,873.33 on January 8, 2008, and is the best performer this year among the world's 10 biggest stock markets.

Foreign fund inflows have surged 64 per cent this year, making the gauge the most expensive in Asia and among the BRIC markets that also include Brazil, Russia and China.

Krishnan said portion of cash in the firm's funds has been increased to between 15 per cent and 20 per cent as the Sensex rallied from 18,000 to 20,000.

Stocks on the Sensex are valued at 19.5 times earnings, compared with 13.7 times for Brazil's Bovespa Index, eight times for Russia's Micex Index and 16.3 times for China's Shanghai Composite Index, among the so-called BRIC markets.

Bajaj Allianz has yet to decide if it will buy shares in Coal India's Ltd's initial public offering.