India Stocks May Suffer Election ‘Blip,’ HDFC Says

(Bloomberg) -- Indian stocks may halt their second- quarter rally unless the next government attracts foreign investment to revive the economy, said HDFC Standard Life Insurance Co., the country’s sixth-largest private insurer.

The ruling Congress party-led coalition may have won the most seats without securing enough votes to form a government, based on exit polls after a five-week election that ended yesterday. SGX CNX Nifty Index futures slumped the most in two weeks in Singapore while Indian stocks traded in the U.S. sank.

“The election outcome will only be a blip,” Prasun Gajri, chief investment officer at HDFC Standard Life, which manages $1 billion in equities, said in an interview in Mumbai yesterday. “It isn’t the only determinant for the market. It may impact the markets for a month or two but nothing beyond that.”

The Bombay Stock Exchange Sensitive Index, or Sensex, was the worst performer in the first quarter among the so-called BRIC markets that also include Brazil, Russia and China. The gauge rebounded 24 percent in the second quarter, beating benchmark indexes in Brazil and China.

“The rally has been too fast, too soon,” Gajri, 37, said. While the economy has shown signs of an improvement, investors will need to watch for more data, he said.

Nifty Futures Fall

Nifty index futures, derived from the 50 stocks on the underlying S&P CNX Nifty Index on the National Stock Exchange of India Ltd., fell 2.2 percent to 3,560 as of 10:45 a.m. in Singapore, the most since April 28. The Bank of New York Mellon India ADR Index dropped 5.5 percent to 557.22, the most since March 5. The Sensex slid 1.1 percent in Mumbai yesterday.

American depository receipts or ADRs of Infosys Technologies Ltd., India’s second-largest computer-services provider, dropped 4.7 percent to $30.36, the most since April 15. Those of ICICI Bank Ltd., India’s second-largest lender, tumbled 6.7 percent to $20.99. That’s the largest drop since April 20.

The International Monetary Fund expects India’s economy to grow 4.5 percent in 2009, while Reserve Bank of India Governor Duvvuri Subbarao said April 21 that government stimulus and monetary easing could help the economy grow 6 percent in the year that started April 1. The $1.2 trillion economy expanded 5.3 percent in the three months to Dec. 31, the weakest pace of expansion since the last quarter of 2003.

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