A maturing market amid the mayhem
Goldman, Moody’s bring some cheer; can the govt build on it?
A battered government has some good news to cheer this week. First, rating agency Moody’s kept the country’s rating outlook at stable, providing a breather after two other global firms downgraded it to negative.
Goldman Sachs on Thursday upgraded Indian equities to ‘overweight’ from ‘market-weight’. The Wall Street investment bank has cited a recovery in growth and inflation moderation going ahead as reasons for its upgrade. It has set an end-2013 end target for the Nifty at 6,600 points, a 14 percent upside from current levels.
And there’s some more good news. Goldman said that economic growth is likely to accelerate to 6.5 percent in 2013 backed by favourable external sector demand outlook and a pick-up in domestic reforms.
All this is boosting sentiment on the street. The Sensex crossed 19,000 in trade on Thursday.
Goldman’s India upgrade comes a bit late in the day, as UBS, Deutsche Bank and JPMorgan have already raised their India equity targets in recent months. But Standard & Poor’s and Fitch still have a negative outlook on India.
However, the affirmations come after the initial euphoria of the mid-September reforms ebbed as graft allegations and the government’s weak fiscal situation again took centre stage.
The government has also been put on the mat by a determined opposition which has held the winter session of parliament hostage demanding a debate with a vote on the issue of allowing foreign entry in multi-brand retail.
But it is tough to believe that the government has not done its calculation well. Though numbers will speak for themselves when voting happens, the government has said it is confident with votes, especially after DMK decided to support them.
The winter session has a heavy agenda with 25 bills pending for consideration and passing. Passage of key bills like pension, insurance, banking laws amendment is key to keeping investor confidence in India afloat.
Agreeing to a vote on foreign direct investment (FDI) in retail shows the government is serious. Whether it can carry the day will depend on its political skills going ahead.