Congress victory likely to bring back bull charge

Mumbai: The bulls are back in business in India after the ruling Congress party coalition thumped its rivals and won a second term in office, raising expectations the big election win will pave the way to speedier reforms to boost the economy.

China and India are the two major economies that are forecast to post more than five per cent expansion this year, which is sharply lower than in the past few years but compares with a contraction projected for the developed world. The political stability in New Delhi could prepare the ground for accelerated growth.

Manmohan Singh, the first prime minister to be sworn in for a second consecutive term, is expected to focus on the economy to generate jobs, particularly in helping build creaking infrastructure, improve incomes and plug a burgeoning hole in the budget.

Topping the wishlist are stake sales in state-controlled companies, a process that could raise funds for the cash-strapped government and lure investors to the stock market.

Still, the stampede of buyers when trading opened last week after the election result was unprecedented: stocks trading was halted within seconds after the top-30 Sensex vaulted a little over 17 per cent.

By the week's end, the market shrugged off bouts of profit-taking, and held gains of 14 per cent - the biggest weekly rise in 17 years. The rally also extended a weekly run of gains to 11, the longest in four years.

"Investors may be tempted to sell into the rally in India. However, we believe this to be a mistake," Singapore-based BNP Paribas strategists led by Clive McDonnell wrote in a report. "The dramatic re-rating of the Indian market is set to continue."

The brokerage said the Sensex, which closed at 13,887.15, could overshoot 16,400 as fund managers grabbed opportunities in a growing economy and as companies begin to revise upwards corporate earnings.

Among its top picks were: Maruti Suzuki India Ltd, the country's largest carmaker that is majority owned by Japan's Suzuki Motor Corp; Indiabulls Real Estate Ltd, battery producer Exide Industries Ltd, Bank of India, utility vehicle maker Mahindra & Mahindra Ltd and JSW Steel Ltd.

Foreigners were big investors in Indian shares, with purchases in one day topping $1.1 billion last week. They have bought shares worth over $3 billion in May, following net inflow of $1.5 billion in April. A revival in share sales by the government could boost foreign appetite.

- The writer is a journalist based in India.