Bloomberg News

India Economy to Grow at 7% This Fiscal Year, HSBC Private Says

October 14, 2011

Oct. 14 (Bloomberg) -- Arjuna Mahendran, who helps manage about $499 billion as head of Asia investment strategy at HSBC Private Bank in Singapore, comments on the outlook for Indian equities in an interview with Bloomberg UTV.

The benchmark BSE India Sensitive Index rose 1.2 percent to 17,082.69 at the 3:30 p.m. close in Mumbai, the steepest weekly climb in six weeks.

On India’s economic growth:

“Growth of 7 percent looks more realistic in the year to March 31, 2012, and the reason being that the world is slowing down. It’s already being factored into the financial markets.

‘‘India remains a large domestically-driven economy, which is her strength. Nevertheless, export and services sectors have grown enormously in the last decade and those are the sectors that are going to slow initially. The domestic sector will also be impacted by higher interest rates.’’

On inflation:

‘‘The inflationary pressure that we have seen not just in India, but across Asia and other emerging markets recently, has been caused by the fact that we have grown too fast in the last three years after the crisis. We have reached the limits of growth and that is spurring wage increases, which have to be restrained before we get into an inflationary vicious cycle.’’

‘‘Foreign funds will start to flow once inflation in the emerging markets is on a downswing. That would manifest itself early next year, sometime in the first quarter.’’

On investment strategy:

‘‘We are buying at current market levels. We do build in some protection just to see that we don’t get caught out if there’s another down draft. I am starting to buy judiciously, not aggressively. I am still heavily in cash. We haven’t seen these sort of economic conditions for several decades globally, or for that matter in India.”

--Editor: Ravil Shirodkar

-0- Oct/14/2011 10:16 GMT

To contact the reporter on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net

To contact the editor responsible for this story: Shiyin Chen at schen37@bloomberg.net -0- Oct/14/2011 09:21 GMT


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