International investment bank Goldman Sachs Inc. expects the Nifty index to rally more than 10% to 6,900 by the end of 2014.

International investment bank Goldman Sachs Inc. expects the Nifty index to rally more than 10% to 6,900 by the end of 2014.

By
• Sudeep Jain

Reuters

International investment bank Goldman Sachs Inc.GS +0.68% on Tuesday lifted its view on Indian stocks, citing growing hope among investors that Narendra Modi will be India’s next prime minister.

Gujarat chief minister Narendra Modi’s reputation as being the choice of business leaders has received another endorsement in the run-up to national elections. 




International investment bank Goldman Sachs Inc. on Tuesday lifted its view on Indian stocks, citing growing hope among investors that Mr. Modi will be India’s next prime minister and his party the Bharatiya Janata Party will be in power after national elections which are scheduled to happen before the end of next May.  

“Domestic equity investors tend to view … Narendra Modi as an agent of change,” Goldman Sachs said in its note, entitled “Modi-fying Our View.” 

The endorsement comes as the political battle between Mr. Modi and Rahul Gandhi, the face of the ruling Congress party, is intensifying. Congress’ reputation among investors has taken a beating in recent years due to a spate of corruption allegations as well as its failure to push through long-awaited economic reforms and infrastructure investment.  

Mr. Modi, on the other hand, is credited with boosting Gujarat’s economic development during his 12 years as the state’s chief minister by building infrastructure and reining in corruption.  

“BJP and Mr. Modi, in particular, have been focused on infrastructure and capital spending in the past and a BJP-led government may be beneficial for the investment demand pick up,” Goldman Sachs said. 

Indeed, optimism about Mr. Modi’s chances has been one of the drivers of a record-breaking rally in India’s benchmark stock index last week, analysts and investors said.

Shares have been climbing even as the country faces a bout of stagflation. The economy is growing at its slowest pace in a decade and inflation has flared up thanks to a sharp drop in the value of the rupee against the dollar. 

Goldman said this could be because political factors are trumping economic gloom in investment decisions. It expects the Nifty index to rally more than 10% to 6,900 by the end of 2014. 

Goldman says current opinion polls suggest the BJP could do well in local polls scheduled to take place in five states this month and that would be a sign that the party would do well in next year’s national elections.

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