Indian stocks, up 40 per cent this year, have the potential to deliver more double-digit returns in coming years as consumers spend more and firms invest in additional equipment to increase sales, a fund manager said.
"One can expect a 20 per cent return each year in the medium term and anything beyond that will be a bonanza," P G R Prasad, Managing Director at SBI Mutual Fund, said on Monday, noting that by medium term he meant about three years.
Around $10.5 bn in foreign money has flowed into Indian stocks this year, up 20 per cent from last year, mainly on expectations the economy will grow 7-7.5 per cent in the year to March 2006 and show similar growth for the next three years.
Prasad said his top picks for 2006 would come mainly from infrastructure, vehicle-parts makers, software services, textiles and pharmaceutical.
He declined to comment on individual stocks but companies in those sectors that have done well this year include construction firm Larsen and Toubro Ltd and drug maker Cipla Ltd.
"Anything connected with infrastructure like construction will flourish," Prasad said.
"The world is dependent on India in a big way in newly emerging sectors like automobile ancillaries (parts makers)."
India, Asia's third-largest economy and home to more than a billion people, has embarked on an extensive drive to rejuvenate rundown roads, ports and airports, acknowledging that its worn-out infrastructure is a big drag on the economy.
marketing@alchempro.com
