HDFC fund chief sees 20% return from market

Equities may return as much as 20% annually over the next three to five years, HDFC Asset Management chief investment officer Prashant Jain said. “Returns should be in line with earnings growth,” Jain, who oversees six of the 15 best-performing funds in the past decade, said. Earnings growth of 15% to 20% “from a diversified portfolio of equities is not very difficult to achieve,” he said.

The Bombay Stock Exchange (BSE) Sensex has rallied for a record seven straight quarters. The gauge has surged 18% this year as overseas investors bought a record $21 billion of equities on the expectation that surging consumer demand will boost corporate earnings even as global growth slows.

The Sensex has gained 28% from a May 25 low, approaching its record closing high of 20,873.33 on January 8, 2008.

Foreign fund inflows have surged 59% this year, according to data from the Securities and Exchange Board of India (Sebi) compiled by Bloomberg. Gross domestic product (GDP) expanded 8.8% in the June quarter from a year earlier, the most among major economies in Asia after China.

“India is clearly emerging as a key asset globally,” said Jain, who manages $21 billion in assets. “How many economies are there in the world which are of our size, growing at 8% to 9%, where neither the companies nor the households are leveraged?” The gains have made India the most expensive among the world’s 20 largest stock markets, according to data compiled by Bloomberg. Stocks on the Sensex are valued at 19.5 times earnings, compared with 13.7 times for Brazil’s Bovespa, 7.8 times for Russia’s Micex and 15.1 times for China’s Shanghai Composite, among the so-called Bric markets. “The markets are close to being fairly valued,” Jain said on Wednesday. “In three years, the economy and many companies have grown meaningfully. I don’t think it’s overvalued.”India stocks aren’t in a “bubble” territory even with the Sensex approaching its all-time high, BNP Paribas analysts led by Manishi Raychaudhuri wrote in a report on Wednesday.

Source: http://www.financialexpress.com/news/hdfc-fund-chief-sees-20-return-from-market/694120/