Investors are punishing stocks in India more than in any of the other largest emerging markets as government measures to curb inflation cut profits at companies from Steel Authority of India to Grasim Industries.
Steel Authority, India’s second largest producer of the metal, last week was valued at 9 times projected earnings, 41% less than at the start of 2008. The ratio for Grasim, the nation’s third biggest cement maker, dropped 32% to 8.5. Price-to-earnings for the entire Indian market slumped 33% as foreign investors turned net sellers for the first time since at least 2000, more than in Brazil, Russia and China, where they fell 10% to 31%, data compiled show.
Investors are showing less faith in India — even after Sensex jumped 13% from its March low because companies produce fewer commodities than Russia and Brazil, the nation’s gross domestic product is growing slower than China’s and a scarcity of coal, oil and iron ore drove inflation to a three year high.
Overseas fund managers pulled a net $3.03 billion out of Indian equities in the first three months of the year, data show. That’s the first time foreigners have been net sellers on a quarterly basis since the data were first compiled in 2000.
Indian shares are valued at 10.9 times analysts’ estimated 2008 earnings, based on the median of 573 companies analysed. That’s the lowest among the four BRIC markets. Makers of steel, cement and other materials have the biggest discounts, with a median price-earnings ratio of 8.
China, which has $1.68 trillion in foreign reserves, more than five times India’s balance, has beaten out its South Asian rival on the purchases of over $10 billion in oil and gas assets from Nigeria, Kazakhstan and Canada in the past two years.
“The Chinese government just has their act together more than the Indian government does,” ING’s Landesman said. “I have no idea what I'm going to get from India.”
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