Around the Markets: India's stock market surpasses $1 trillion in value

[DavyBUK]

MUMBAI: India became the third emerging stock market after China and Russia to surpass $1 trillion in value, helped by the fastest economic growth in 60 years, a strengthening currency and overseas investment.

The Bombay Stock Exchange's 30-member benchmark Sensitive Index, or Sensex, rose 0.8 percent Tuesday to 14,508.21, putting it 1 percent below its Feb. 8 record. The Indian rupee, Asia's best performer this year against the dollar, advanced to a nine-year high, helping push the market's value to $1.01 trillion.

Indian economic growth averaging 8.6 percent the past four years helped spur earnings growth of as much as 35 percent for the year that ended on March 31, said Ratnesh Kumar, Citigroup's Mumbai-based head of India research. Overseas funds also are supporting the stock market after buying a net $3.76 billion in equities this year, the Securities and Exchange Board of India said on Monday.

"Profit growth at Indian companies has been phenomenal," said Ashish Goyal, who helps manage about $20 billion in Asian stocks at Prudential Asset Management. "You can't ignore a market that delivers such fantastic earnings."

The Sensex jumped 34 percent over the past year and the rupee strengthened 12 percent, closing at 40.4975 per dollar on Tuesday, its highest since May 1998.

The Sensex is valued at 23 times reported earnings, the highest for any index in Asia after China and Japan, and more than the benchmark's five-year average of about 17 times profit.

A combined $10 billion in new share sales planned by ICICI Bank, Tata Steel and DLF will help raise the value of India's stock market even further.

ICICI Bank, India's largest lender by market value, is raising $5 billion in the country's biggest share sale. Tata Steel's chairman, Ratan Tata, is selling equities to help fund his $12 billion purchase of London-based Corus, creating the world's sixth-largest steel maker. DLF, a New Delhi-based property developer, plans to sell at least $2.1 billion of stock in an initial public offering.

The offers are dwarfed by Industrial & Commercial Bank of China's $22 billion stock sale, the world's largest initial public offering, and OAO Rosneft's $10.6 billion sale in Russia. China's total stock market value has doubled in the past year to $2.47 trillion. Russia's market value dipped below $1 trillion this month and reached to $949 billion Tuesday, according Bloomberg data.

Reliance Industries, India's biggest stock, is ranked 137th globally, compared with 7th and 12th for the biggest listings in China and Russia.

"Even as we reach $1 trillion, the size of our companies is still small in comparison to global peers," said Rajiv Anand, a fund manager at Standard Chartered Mutual Fund in Mumbai. "We have a long way to go to achieve scale."

Rising earnings are leading some Indian companies to expand overseas. Sun Pharmaceutical Industries, which is headed by the billionaire Dilip Shanghvi, agreed on May 21 to spend $454 million in cash to buy an unprofitable Israeli rival and repay the rival's creditors. Shares of Sun, India's biggest drug maker, have soared sixfold in the past four years.

Record profit at Hindalco Industries, owned by the billionaire Kumar Birla and India's biggest aluminum producer, helped the company pay more than $3.4 billion to acquire Novelis of Atlanta. Birla was ranked 86th on Forbes' list of the world's richest people in 2006, after his wealth almost doubled in a year.

Founders of companies included in the Bombay Stock Exchange's BSE 200 Index own about 73 percent of the benchmark's combined market value, according to data on the exchange's Web site. Overseas investors own about 21 percent and local mutual funds 3.7 percent, the exchange said.

Bharti Airtel, the best-performing stock in the Sensex over the past five years, has jumped 30 times in value. India's largest mobile-phone carrier posted a 12th straight quarter of record profit as it added new customers in the world's fastest-growing wireless market.

Reliance Industries climbed tenfold over the past five years, even after the company was split last year to settle a dispute between the Ambani brothers, Mukesh and Anil, who control the Reliance Group.

Finance Minister Palaniappan Chidambaram said in March that India's gross domestic product is likely to surpass $1 trillion next year, making it the third Asian economy to do so.

http://www.iht.com/articles/2007/05/...ess/sxasia.php