Overseas investors bought the most Indian equities in more than two months after the government ended a 14-month freeze on diesel prices to cut its fiscal deficit.
Offshore funds purchased a net $522.1 million of shares on Sept. 14, the highest level since July 2, the Securities & Exchange Board of India said yesterday. The inflows came before the government changed foreign ownership rules after trading ended that day.
Prime Minister Manmohan Singh increased on Sept. 13 diesel prices for the first time since July 2011 to reduce the subsidy burden, and followed it up by opening the retail and aviation industries to foreigners. The measures may help accelerate the biggest fund flows in Asia this year, Citigroup Inc. and Bajaj Allianz Life Insurance said.
“It has been foreign institutional investors all the way, investing aggressively and relatively more in India than in its peers,” Aditya Narain, the Mumbai-based head of India research at Citigroup in Mumbai, said in a note yesterday. “We expect this to continue over the near term.”
Offshore funds have plowed a net $13.3 billion into Indian shares this year, the most among 10 Asian markets outside China tracked by Bloomberg, on speculation the government will revive plans to boost an economy growing at the slowest pace in three years. The BSE India Sensitive Index (SENSEX) has climbed 20 percent in the period, the second-best performance among benchmark gauges in countries with at least $1 trillion in market value.
Citigroup increased its June 2013 target for the 30-stock gauge by 8 percent to 19,900, and Deutsche Bank AG raised its year-end forecast for the measure by 11 percent to 20,000, the brokerages said in notes to clients yesterday.
The Sensex rose 0.4 percent to 18,542.31 yesterday, the highest level in 14 months. The gauge is valued at 14.7 times estimated earnings, below its 16.2 multiple on Feb. 21, data compiled by Bloomberg show. The MSCI Emerging Markets Index (MXEF)’s valuation of 11.3 times.
India’s $1.2 trillion stock market, Asia’s fifth-biggest, is influenced by flows from abroad. Flows surged to a record in 2010, making the Sensex the best performer among the world’s 10 biggest markets. A record outflow in 2008 triggered the biggest annual slump of 52 percent.
The regulator provides data on shares bought and sold by large investors, including trades in the primary and secondary markets, with a delay of at least a day.
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