India's election gamble

Article Abstract:

Indian share prices have risen, and foreign investment has increased in early 1996. There is less concern over political risk, since a coalition appears likely to succeed the Congress Party in government. Continued economic reform should help the stock market. Growth in corporate earnings is between 25% and 30%, and economic growth is at some 6% in 1996. Inflation is falling, and monetary policy is being loosened, factors which should also help share prices. Grounds for caution include the risk that reform could stall, and a rise in public debt could lead to a rise in interest rates.

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India: losing favour

Article Abstract:

Foreign investors tend vary greatly in their view of Indian shares, either favoring them greatly or shunning them. Indian shares were in favor in 1st half 1996 but the first budget of the United Front was followed by a drop in share prices. There is concern about India's budget deficit and the emphasis on food subsidies in the budget. There is also concern about corporation tax policy at a time when corporate earnings are difficult to forecast. Foreign investors are not likely to be enthusiastic while these problems continue.

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