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Indian Corporations will experience world’s best profitability in coming years – the only doubt lies around escalating oil prices and deteriorating public finances
India is poised for golden days in coming years. The corporate sector of India is just booming at the present with huge Foreign Direct Investments and outsourcing dollars flowing in.
According to media reports, Indian earnings are likely to grow 12-15 per cent a year for three years as investment and consumption surge, with power stocks set to outperform, a fund manager at First State Investments said on Monday.
But a further jump in global crude oil prices and deteriorating public finances could spoil the investment climate in Asia's third-largest economy, said Vijay Tohani, senior portfolio manager at First State.
First State manages more than $1 billion in Indian equities--about a tenth of the assets under the fund's management in global emerging markets--which makes it one of the bigger investors in Indian equities.
"India is one of the strongest structural growth stories in the globe," Edinburgh-based Tohani said in Singapore.
Tohani was bullish on the power industry and companies like state-run Bharat Heavy Electricals Ltd, India's top power equipment maker, ABB India Ltd, switchgear and generator maker, and mid-sized Crompton Greaves Ltd.
"These are going to be the nuts and bolts suppliers to the sector and there is a tremendous predictability for these businesses in the coming years," Tohani said.
"I like the whole power food chain--suppliers, generators and distributors. India has to double the power capacity even remotely have a chance to be a major economic power," he said.
Tohani was also bullish on firms expanding rapidly.
Companies such as top petrochemical maker Reliance Industries Ltd and Bharti Tele-Ventures Ltd, 30.8 per cent owned by Singapore Telecommunications Ltd, are executing billions of dollars worth of capacity expansion to tap soaring demand for everything from telecoms services to motorcycles.
As a consequence, GDP is forecast to expand 7 per cent, one of the highest in the world, in the year to March 2006.
"Only 11 per cent of the GDP is directly linked to exports -- so in many ways you are looking at domestic consumption as the key driver for growth," Tohani said, adding that the low exports exposure was a safety valve as many other Asian economies were heavily reliant on exports to grow their GDPs.
BIZ/FINANCE ARTICLES
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