Indian investors seek Goddess Lakshmi’s blessings for gains

Investor Roshan Chawla offered thanks to the Hindu goddess of wealth, on Diwali, praying for a repeat surge in equities.
Indian investors seek Goddess Lakshmi’s blessings for gains
Bombay Stock Exchange Sensitive Index has surged 102 percent since falling to a three-year low on the eve of last year’s festivities.
By Pooja Thakur and Rajhkumar K Shaaw
Sun 25 Oct 2009 04:00 AM

Investor Roshan Chawla offered thanks to a garlanded statue of Lakshmi, the Hindu goddess of wealth, on Diwali, praying for a repeat of this year's record surge in equities.Chawla, 66, joined brokers and investors at the Bombay Stock Exchange in making token stock purchases during a one-hour trading session on Diwali, the festival of light and the start of the Hindu new year.  Indian stock bourses held the truncated trading session until 7:15 pm on October 17 in Mumbai. The Bombay Stock Exchange's Sensitive Index ended little changed after climbing 4.1 percent last week.

Tata Consultancy Services Ltd, India's largest software exporter, rose 1.6 percent to 608.85 rupees ($13.23) after reporting quarterly profit that beat estimates after clients increased spending.

Since falling to a three-year low on the eve of last year's festivities, the benchmark Sensitive Index has surged 102 percent, adding $729bn to investor wealth.

"Last Diwali was a disaster," said Chawla as he watched the stock ticker scrolling round the outside of the exchange's 28-storey building in Mumbai. "This year Diwali is much better, the sentiment is visible all around."

Overseas investors have poured $13.4bn into Indian equities this year, set to surpass the record $17.2bn bought by them in 2007, lured by an economy that's growing faster than every major nation except China. The rally has pushed valuations at Indian companies to the highest in 18 months, so investors can't expect another year of those gains, according to brokerage Enam Securities Pvt.

"The scenario is not as simple as it was last year when valuations were cheap, liquidity was frozen and business confidence almost nil," said Mumbai-based Dharmesh Mehta, head of equities at Enam Securities. "This time going into Diwali, it's exactly the reverse."

Enam last Diwali published a report dated October 2009 that looked back on an imagined 74 percent rally in the Sensex as investors recovered from the turmoil of Lehman Brothers Holdings Inc's September 2008 bankruptcy and the freezing of credit markets. Mehta says investors have asked for reprints of his company's report that predicted the Sensex would rise to 15,109 by Diwali from the 8,701 level it traded at on October 24, 2008."A lot of us missed the opportunity to buy stocks as we didn't expect such a sharp rally," said Jeel Chheda, a 24-year-old investor who is a sub-broker for IIFL Ltd in India's financial capital. Jeel also says she services about 100 clients and the mood among them is of cautious optimism.

"Everyone is certainly looking for a good level to enter, waiting for some correction," she said.

The Sensex is trading at 21.38 times earnings, compared with 8.1 in October last year, according to Bloomberg data. The MSCI Emerging Markets Index trades at 21.23 times earnings.

Still, Morgan Stanley says Indian stocks are in a "sweet spot" as profits rebound and may drive the benchmark index 13 percent higher by the end of next year.

Earnings at companies in the Sensex will rise 15 percent in the financial year ending March 31, 2010, Morgan Stanley analysts Ridham Desai and Sheela Rathi wrote in a report on October 15, increasing an earlier forecast for a 10 percent increase.

Profit growth may boost the Sensex to 19,400 by the end of 2010, according to them.

The best performers on the index include Mumbai-based Tata Motors Ltd, India's largest truckmaker, which jumped 264 percent this year, while Mahindra & Mahindra Ltd of Mumbai, the nation's biggest sport-utility-vehicle and tractor maker, rose 242 percent. Sterlite Industries (India) Ltd, India's largest copper producer, located in the southern Indian state of Tamil Nadu, also rose 215 percent.

 "I would pray for the prosperity to continue," said Kamlesh Shah, 46, of JG Shah Financial Consultants Pvt, a Mumbai-based investor and broker who's been investing for 28 years. "The mood has changed from being very gloomy last year to optimistic today."

During Mumbai's late-evening trading session, investors lit lamps and made offerings for a prosperous year.

Determined by the new moon, the so-called Muhurat trading held every year on Diwali is considered the most auspicious time to start investments and to put aside losses from the past year. Hindus make up 80.5 percent of the nation's population.

"We have seen a drastic change from last year," said Milind Bhaskar Gune, 45, who sells insurance for a living and has been investing in stocks for 25 years. "The stock market is the only place one can make lucrative returns."

This article is courtesy of Bloomberg.

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