India stocks climb to new high as parliament opens for budget talks
July 8, 2014, 12:08 am TWN
MUMBAI -- Indian equities climbed to a fresh high Monday for the second time in less than a week as parliament opened ahead of a budget expected to see the announcement of long-term reforms.
The Bombay Stock Exchange's key benchmark index, the Sensex, climbed 0.6 percent to 26,116.73 after reaching a high of 25,981.51 points on Friday.
"People are looking at the budget as the start point of a continuous reform process," said Harendra Kumar, head of brokerage Elara Capital in Mumbai.
Economists expect the budget to contain a credible outline of steps to steer India from a subsidy-laden, bureaucratic culture to a more business-friendly investment climate.
Since winning a landslide election in May, Prime Minister Narendra Modi has announced some tough, long-pending measures such as a rail fare hike.
While there has been a public outcry, India's financial markets have reacted positively to Modi's attempts to start overhauling an economy saddled with slow growth and weak public finances.
The Sensex has risen more than eight percent since Modi took office in June and more than 23 percent in 2014 as it became increasingly likely that his right-wing Bharatiya Janata Party would emerge victorious in the elections.
Still, analysts say Modi will struggle to shrink a yawning fiscal deficit and add that he faces the challenge of spiraling inflation as food prices soar on the back of a weak monsoon.
"We expect the main policy push to materialize only next year once the administration is firmly established and has dealt with near-term challenges such as poor rains," said HSBC in a note last week.
"Once adopted, it will also take some time before the reforms yield their expected growth dividend," it added.
Growth has slowed from near double-digits a few years ago to 4.7 percent in 2013, marking the second straight year of sub-five percent expansion, hit by high interest rates, falling investment and wage-eroding inflation.